The Effect of Trade Secret Protection on Venture Capital Investments: Evidence From the Inevitable Disclosure Doctrine
Castellaneta F., Conti R., Kemeny C., Veloso F. (2016). The effect of trade secret protection on venture capital investments: Evidence from the inevitable disclosure doctrine. Journal of Business Venturing 31(5): 524-541
46 Pages Posted: 11 Jan 2019
Date Written: December 8, 2018
This study investigates how the inevitable disclosure doctrine, a form of trade secret legal protection, affects venture capital (VC) investment. Using a data set of VC deals realized in the United States from 1980 to 2012, we find that a rule in favor of inevitable disclosure increases the amount of VC investment. We address mechanisms that can explain these findings by assessing how the inevitable disclosure doctrine (a) displays a different impact on VC investments according to the characteristics of the state and the industry where the start-ups operate and (b) affects the performance of VC-backed firms. We also discuss managerial and policy implications of our findings.
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