Real effects of financial reporting and disclosure: Innovation

This paper provides a general framework for thinking about issues related to innovation and disclosures, and highlights how academic research can contribute to the debate.

Author:

• Ane Tamayo and Ana Simpson, London School of Economics

Introduction

Technological innovation plays a pivotal role in a country’s economic growth and development (Schumpeter, 1911, 1934; Solow, 1957; Romer, 1986). According to a report by the OECD (2015), innovation can account for a substantial share of economic growth, often around 50% of total GDP growth, depending on the country’s level of economic development and the phase of the economic cycle. This growth stems from interrelated factors such as: (i) investments in knowledge based assets (e.g., software, databases, research and development, firm-specific skills and organisational capital); (ii) technological progress embodied in physical ¬¬capital (e.g., through investment in information and communications technology); (iii) increased efficiency in the use of labour and capital (driven by, for example, process and organisational innovations) and (iv) the creative destruction that results from new innovative firms entering the market and displacing firms with low productivity (Schumpeter, 1943).

The full paper will be published in the annual International Accounting Policy Forum special issue of Accounting and Business Research. The paper will be available on the Taylor and Francis website later in 2020.