Patent Races with Secrecy

18 Pages Posted: 18 Oct 2012

Date Written: September 2012


Firms do not always patent their innovations. Instead, they often rely on secrecy to appropriate the returns of innovations. This paper endogenizes firms’ patent propensity, and shows that when the equilibrium patent propensity is small, strengthening patent protection can decrease firms’ incentive to innovate. Paradoxically, this result holds precisely when a stronger patent policy induces more patent applications. Also, these results can arise even in the simplest patent race model with independent innovations as well as with complementary innovations.

Suggested Citation

Kwon, Illoong, Patent Races with Secrecy (September 2012). The Journal of Industrial Economics, Vol. 60, Issue 3, pp. 499-516, 2012. Available at SSRN: or

Illoong Kwon (Contact Author)

Seoul National University ( email )

Graduate School of Public Administration
599 Gwanak-ro
Gwanak-gu, Seoul 151-742
Korea, Republic of (South Korea)
82-2-880-8551 (Phone)
82-2-877-2411 (Fax)


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