Information Asymmetry and the Inefficiency of Informal IP Strategies Within Employment Relationships

Technological Forecasting & Social Change (forthcoming 2021)

48 Pages Posted: 11 Nov 2020

See all articles by Runhua Wang

Runhua Wang

Chicago-Kent College of Law

Date Written: September 11, 2020

Abstract

Employee mobility and betrayal increase the risks of disclosing unpublished technical information. This study builds a theoretical foundation for the loss of unpublished technical information regarding human capital. It analyzes the inefficiency of informal intellectual property (“IP”) strategies, which include non-disclosure agreements (“NDAs”), covenants not to compete (“CNCs”), and trade secrets, from the maximum probable loss approach. It bridges the legal literature and the economics literature by emphasizing and explaining the information asymmetries in employment relationships regarding the informal IP strategies. NDAs need to be supplemented by CNCs or trade secret law. Enforceable CNCs and trade secrets have a reward function, but trade secrets are more efficient in informal IP management and innovation. Beyond the legal risks imposed by informal IP, companies should actively improve employee loyalty and their security culture through employee management.

Keywords: informal intellectual property, information asymmetries, unpublished technical information, innovation, intellectual property strategy

JEL Classification: K12, O32, O34

Suggested Citation

Wang, Runhua, Information Asymmetry and the Inefficiency of Informal IP Strategies Within Employment Relationships (September 11, 2020). Technological Forecasting & Social Change (forthcoming 2021), Available at SSRN: https://ssrn.com/abstract=3697163

Runhua Wang (Contact Author)

Chicago-Kent College of Law ( email )

565 W. Adams St.
Chicago, IL Illinois 60661
United States

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