The Strategic Effects of Trademark Protection

Review of Financial Studies, 2019

75 Pages Posted: 21 Jun 2016 Last revised: 1 Oct 2019

See all articles by Davidson Heath

Davidson Heath

University of Utah - David Eccles School of Business

Chris Mace

University of Texas at Dallas, Naveen Jindal School of Management, Department of Finance

Date Written: May 2, 2019

Abstract

We study the effects of trademark protection on firm profits and strategy using the 1996 Federal Trademark Dilution Act, which granted additional legal protection to selected trademarks. We find that the FTDA raised treated firms' operating profits and was followed by a spike in trademark lawsuits and lower entry and exit in affected product markets. Treated firms reduced R&D spending, produced fewer patents and new products, and had more recalls of unsafe products. Our results suggest that stronger trademark protection had negative effects on innovation and product quality.

Keywords: trademarks, intellectual property, product market strategy, product quality, innovation

JEL Classification: D22, K2, L43, O31, O34, O38

Suggested Citation

Heath, Davidson and Mace, Chris, The Strategic Effects of Trademark Protection (May 2, 2019). Review of Financial Studies, 2019, Available at SSRN: https://ssrn.com/abstract=2798473 or http://dx.doi.org/10.2139/ssrn.2798473

Davidson Heath (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Chris Mace

University of Texas at Dallas, Naveen Jindal School of Management, Department of Finance ( email )

800 West Campbell
Richarson, TX 75080
United States
972-883-5180 (Phone)

HOME PAGE: http://jindal.utdallas.edu/faculty/christopher-mace/

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