Corporate Conferences as a Coordination Mechanism: Evidence from Firm Performance, Innovation Disclosures, and Product Prices

We examine a topic of concern to antitrust regulators – anticompetitive behavior facilitated by joint conference participation with peers (i.e., horizontal conferencing). Theoretically, conferences, which are often organized by trade associations and investors, present opportunities for product market peers to repeatedly interact and may thus generate knowledge spillovers that may benefit firms and consumers but may also harm consumer welfare. Leveraging rich data for firms in the Pharmaceutical, Biotechnology, and Life Sciences industry, we use the distance from firms’ headquarters to the most frequent conference locations as an instrumental variable for horizontal conferencing. We find that consistent with anticompetitive behavior or the spread of knowledge externalities among peers via horizontal conferencing, participating firms exhibit better innovation productivity and operating profitability. We find that conference interactions are associated with increases in disclosures of competitively sensitive information, consistent with such interactions decreasing proprietary costs of disclosures and thus consistent with anticompetitive behavior’s dominance. In corroboration, the conference interactions are associated with increases in prescription drug prices. Overall, the evidence suggests horizontal conference participation benefits firms, and although stakeholders and consumers benefit through transparency and product improvements, respectively, consumer welfare suffers through more expensive products. Overall, although management benefits from conferencing with product market peers, our study is also informative to antitrust regulators, consumer watchdogs, and conference organizers who are concerned about anticompetitive behavior ensuing from conferences.