A Theory of Trade Secrets in Firms
23 Pages Posted: 1 Nov 2000
Date Written: October 3, 2000
This paper provides a simple theoretical model of trade secrets in hierarchical firms. A crucial assumption is that each manager has access to trade secrets pertaining to his own hierarchical level as well as to all lower levels. The paper explores some implications of this assumption for the optimal degree of trade secrets accumulation and protection as well as for the wage structure in firms. In addition, the model implies that managers may have an incentive to overpay their subordinates and protect their firms' trade secrets too much.
Keywords: Trade Secrets, Turnover, Wage Structure
JEL Classification: O3, J31, J63
Suggested Citation: Suggested Citation