Speech Is Silver, but Silence Is Golden: Information Suppression and the Promotion of Innovation

60 Pages Posted: 19 Jan 2017 Last revised: 10 Nov 2019

See all articles by Gaurav Kankanhalli

Gaurav Kankanhalli

University of Pittsburgh - Katz Graduate School of Business

Alan Kwan

The University of Hong Kong

Kenneth J. Merkley

Indiana University - Kelley School of Business - Department of Accounting

Date Written: June 26, 2019

Abstract

Innovation is difficult to finance as mere disclosure reduces its value. We study intellectual property licenses mandatorily disclosed by US public firms. Firms may temporarily redact information from these filings, offering a counterfactual to full-disclosure. Firms with valuable IP in competitive markets redact more often. Despite increased information asymmetry, investors react positively, inferring redaction signals IP worth hiding. Redactors experience better reactions when concealing tacit knowledge and worse reactions when IP is less protected (natural experiment) or redaction is less credible (repeated redaction, high competition). Our findings show credible non-disclosure partially resolves information frictions for innovative firms in public markets.

Keywords: Innovation, Disclosure, Redaction, Licensing, Patents, R&D

JEL Classification: G30, G38, O30, O32, O34

Suggested Citation

Kankanhalli, Gaurav and Kwan, Alan and Merkley, Kenneth J., Speech Is Silver, but Silence Is Golden: Information Suppression and the Promotion of Innovation (June 26, 2019). Available at SSRN: https://ssrn.com/abstract=2902341 or http://dx.doi.org/10.2139/ssrn.2902341

Gaurav Kankanhalli (Contact Author)

University of Pittsburgh - Katz Graduate School of Business ( email )

Pittsburgh, PA 15260
United States

Alan Kwan

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

Kenneth J. Merkley

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States

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