Information Asymmetry and the Inefficiency of Informal IP Strategies Within Employment Relationships
Technological Forecasting & Social Change (forthcoming 2021)
48 Pages Posted: 11 Nov 2020
Date Written: September 11, 2020
Employee mobility and betrayal increase the risks of disclosing unpublished technical information. This study builds a theoretical foundation for the loss of unpublished technical information regarding human capital.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Keywords: informal intellectual property, information asymmetries, unpublished technical information, innovation, intellectual property strategy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: Suggested Citation