The Innovation Consequences of Mandatory Patent Disclosures

51 Pages Posted: 24 Oct 2019 Last revised: 20 Nov 2020

See all articles by Jinhwan Kim

Jinhwan Kim

Stanford Graduate School of Business

Kristen Valentine

University of Georgia

Date Written: November 19, 2020

Abstract

We investigate the effect of patent disclosures on corporate innovation. Using the American Inventor’s Protection Act (AIPA) as a shock that increased patent disclosures, we find an increase in innovation for firms whose rivals reveal more information after the AIPA and a decrease in innovation for firms whose own disclosures are divulged to competitors as a result of the law. These findings suggest patent disclosures generate both spillover benefits and proprietary costs. Our findings provide justification for patent disclosure requirements by demonstrating positive externalities: rivals’ disclosures facilitate a firm’s innovation. However, we also highlight that mandatory patent disclosures can impose proprietary costs on firms. These results broadly contribute to our understanding of the real effects of disclosure, such that forcing firms to share proprietary information can be privately costly but beneficial to other firms.

Keywords: Patent disclosure, innovation, spillovers, proprietary costs, corporate disclosure

JEL Classification: D23, G38, M40, M41, O30, O31, O32, O34, O38

Suggested Citation

Kim, Jinhwan and Valentine, Kristen, The Innovation Consequences of Mandatory Patent Disclosures (November 19, 2020). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3469400 or http://dx.doi.org/10.2139/ssrn.3469400

Jinhwan Kim (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Kristen Valentine

University of Georgia ( email )

Athens, GA 30602
United States

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