An Empirical Analysis of the Effects of Patents and Secrecy on Knowledge Spillovers

31 Pages Posted: 27 Jul 2006 Last revised: 25 May 2014

See all articles by Tobias Schmidt

Tobias Schmidt

Deutsche Bundesbank - Research Center

Date Written: 2006


Theoretical considerations suggest that secrecy reduces spillovers almost completely through non-disclosure, while the disclosure requirement of patents generates some spillover and at the same time allows firms to appropriate knowledge. In this paper we empirically analyze whether protection by secrecy or protection by patents is associated with lower knowledge spillovers. Since the amount of knowledge spillovers is hard to measure directly, we look at the impact of the usage of protection methods in an industry on the innovation activities of firms using external knowledge. One goal is to assess if firms have moved to a more open innovation business model, i.e. allow more knowledge spillovers to occur despite using protection methods. Our estimations show that the usage of both, patents and secrecy, hinders the innovation activities of firms through the reduction of spillovers to firms in their own industry. We conclude that the appropriability effect of patents outweighs the disclosure effect. We also find some evidence that the open innovation business model has not been implemented widely.

Keywords: Knowledge Spillovers, patents, secrecy, open innovation, ordered probit

JEL Classification: O34, O31, D83

Suggested Citation

Schmidt, Tobias, An Empirical Analysis of the Effects of Patents and Secrecy on Knowledge Spillovers (2006). ZEW - Centre for European Economic Research Discussion Paper No. 06-048. Available at SSRN: or

Tobias Schmidt (Contact Author)

Deutsche Bundesbank - Research Center ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431

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