Information Accessibility and Corporate Innovation

Abstract

This study identifies information accessibility as a determinant of corporate innovation. Using the sudden termination of Google’s search services in China, we find a persistently large negative effect on the intensity and quality of innovation among firms relying on foreign knowledge. The results are stronger for firms in industries dominated by foreign technology, in regions with local web filters, and for firms with fewer alternative sources of foreign information. We also find that the affected firms cite fewer foreign patents and their innovation efficiency declines after Google’s exit. Overall, the results are consistent with the view that access to information is an important driver of technological progress.