Visibility of Technology and Cumulative Innovation: Evidence from Trade Secrets Laws

62 Pages Posted: 10 Sep 2019

See all articles by Bernhard Ganglmair

Bernhard Ganglmair

ZEW – Leibniz Centre for European Economic Research - Junior Research Group Competition and Innovation; University of Mannheim - Department of Economics; Mannheim Centre for Competition and Innovation (MaCCI)

Imke Reimers

Northeastern University - Department of Economics

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Date Written: 2019

Abstract

We use exogenous variation in the strength of trade secrets protection to show that a relative weakening of patents (compared to trade secrets) has a disproportionately negative effect on the disclosure of processes - inventions that are not otherwise visible to society. We develop a structural model of initial and follow-on innovation to determine the effects of such a shift in disclosure on overall welfare in industries characterized by cumulative innovation. We find that while stronger trade secrets encourage investment in R&D, they may have negative effects on overall welfare the result of a significant decline in follow-on innovation.

Keywords: cumulative innovation; disclosure; self-disclosing inventions; Uniform Trade Secrets Act

JEL Classification: D80; O31; O34

Suggested Citation

Ganglmair, Bernhard and Reimers, Imke, Visibility of Technology and Cumulative Innovation: Evidence from Trade Secrets Laws (2019). ZEW - Centre for European Economic Research Discussion Paper No. 19-035 (2019), Available at SSRN: https://ssrn.com/abstract=3450351 or http://dx.doi.org/10.2139/ssrn.3450351

Bernhard Ganglmair (Contact Author)

ZEW – Leibniz Centre for European Economic Research - Junior Research Group Competition and Innovation ( email )

L7,1
Mannheim, 68161
Germany

University of Mannheim - Department of Economics ( email )

D-68131 Mannheim
Germany

Mannheim Centre for Competition and Innovation (MaCCI) ( email )

L 7, 1
Mannheim, 68131
Germany

Imke Reimers

Northeastern University - Department of Economics ( email )

301 Lake Hall
Boston, MA 02115
United States

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