Innovation and Annual Report Readability

Dimitrios Gounopoulos; Winifred Huang; Min Yang

doi:10.1016/j.respol.2025.105301

Innovation and Annual Report Readability

University of Leicester

Research output: Contribution to journal › Article › peer-review

4 Citations (SciVal)

Abstract

We explore the relationship between innovation and annual report readability using multiple innovation metrics. While lower readability can boost innovation, an inverted U-shaped link with patents suggests that excessive opacity becomes counterproductive. We identify two underlying mechanisms—preserving competitive advantages and concealing risks. Consistent with the first mechanism, the innovation-readability link is stronger in competitive markets, where firms reduce transparency to better protect themselves from competitors. In line with the second mechanism, the innovation-readability link is stronger for riskier firms. Overall, our findings support the idea that firms strategically tailor their disclosure to match their innovation needs.

Original language	English
Article number	105301
Number of pages	22
Journal	Research Policy
Volume	54
Issue number	8
Early online date	28 Jul 2025
DOIs	https://doi.org/10.1016/j.respol.2025.105301
Publication status	Published - 31 Oct 2025

Data Availability Statement

Data will be made available on request.

Acknowledgements

We are grateful to Rui Alberqueque, Jeremy Bertomeu, Gonul Colak, George Constantinides, Mark Flannery, Matt Gustaffson, Bradley Hendrick, Tim Jenkinson, Ranko Jelic, Kostas Koufopoulos, Joss Lerner, Clive Lennox, Tim Loughran, Evgeny Lyandres, Bill McDonald, Tarun Ramodarai, David Marginson, and Russe Wermer for their helpful comments and suggestions. We would also like to thank seminar participants from the Universities of Bath and the University of Cardiff, as well as participants at the Academy of Management Conference, British Academy of Management, Financial Management (U.S.) Conference, and the European Financial Management Association Conference, for their valuable feedback. Part of this project was conducted while Dimitrios Gounopoulos was at the University of Sussex. We thank Bill McDonald for sharing textual analysis information. Corresponding author: [email protected] (D. Gounopoulos). We would like to express our sincere thanks to Professor Ben Martin, Editor-in-Chief of Research Policy, Associate Editor Daniele Rotolo, and the anonymous reviewers. We are deeply grateful for their valuable guidance, constructive feedback, and insightful suggestions that have significantly improved our article.

Funding

We are grateful to Rui Alberqueque, Jeremy Bertomeu, Gonul Colak, George Constantinides, Mark Flannery, Matt Gustaffson, Bradley Hendrick, Tim Jenkinson, Ranko Jelic, Kostas Koufopoulos, Joss Lerner, Clive Lennox, Tim Loughran, Evgeny Lyandres, Bill McDonald, Tarun Ramodarai, David Marginson, and Russe Wermer for their helpful comments and suggestions. We would also like to thank seminar participants from the Universities of Bath and the University of Cardiff, as well as participants at the Academy of Management Conference, British Academy of Management, Financial Management (U.S.) Conference, and the European Financial Management Association Conference, for their valuable feedback. Part of this project was conducted while Dimitrios Gounopoulos was at the University of Sussex. We thank Bill McDonald for sharing textual analysis information. Corresponding author: [email protected] (D. Gounopoulos). We would like to express our sincere thanks to Professor Ben Martin, Editor-in-Chief of Research Policy, Associate Editor Daniele Rotolo, and the anonymous reviewers. We are deeply grateful for their valuable guidance, constructive feedback, and insightful suggestions that have significantly improved our article.

Funders
University of Sussex
Cardiff University
British Academy of Management
European Financial Management Association
Academy of Management Conference

Keywords

Annual report readability
Bog index
Patent
R&D

ASJC Scopus subject areas

Strategy and Management
Management Science and Operations Research
Management of Technology and Innovation

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10.1016/j.respol.2025.105301Licence: CC BY

Cite this

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Innovation and Annual Report Readability

Abstract

Data Availability Statement

Acknowledgements

Funding

Keywords

ASJC Scopus subject areas

Access to Document

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