Strategic Information Disclosure and Competition for an Imperfectly Protected Innovation

Abstract:     
The imperfect appropriability of revenues from innovation affects the incentives of firms to invest, and to disclose information about their innovative productivity. It creates a free-rider effect in the competition for the innovation that countervails the familiar business-stealing effect. Moreover, it affects the disclosure incentives such that full disclosure emerges for extreme revenue spillovers (e.g., full protection and no protection of intellectual property), but either partial disclosure or full concealment emerges for intermediate spillovers. I analyze the implications of imperfect appropriability and strategic disclosure for the firms' profits and the probability of innovation.

Number of Pages in PDF File: 38

Keywords: externality, free-rider effect, information disclosure, Innovation, R&D competition, spillovers, strategic substitutes

JEL Classification: D82, D83, L23, O31, O32

working papers series