Defensive Disclosure under Antitrust Enforcement
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus Research Institute of Management
Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Tinbergen Institute; Erasmus Research Institute of Management (ERIM)
July 2, 2012
We formulate a simple model of optimal defensive disclosure by a dominant firm facing uncertain antitrust enforcement and test its implications using unique data on defensive disclosures and patents by IBM. Our results indicate that stronger antitrust enforcement leads to more defensive disclosure, that quality inventions are also disclosed defensively, and that defensive disclosure served as an alternative, but less successful, mechanism to patenting at IBM in appropriating returns from R&D. We extend our analysis to two other exceptionally large firms with defensive-disclosure activity, AT&T and Xerox, and show that their patenting propensity declined under increased antitrust enforcement relative to other firms in the industry. Overall, we show how these firms used defensive disclosure as a strategy to balance the benefits of patenting with the costs of uncertain antitrust enforcement.
Number of Pages in PDF File: 42
Keywords: Defensive Disclosure, Antitrust, Innovation, IBM
JEL Classification: L40, O38, L21working papers series
Date posted: September 30, 2012
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