Visibility of Technology and Cumulative Innovation: Evidence from Trade Secrets Laws
62 Pages Posted: 10 Sep 2019
Date Written: 2019
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: Suggested Citation