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Trade secret protection, multinational firms and international trade

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  • Klein, Michael A.

Abstract

Multinational firms indicate that the threat of trade secret misappropriation by current and former employees remains a substantial impediment to conducting business in emerging markets. In this paper, I examine the economic implications of strengthening international standards in trade secret protection. I develop a general equilibrium model featuring heterogeneous firms that differ in the degree to which they must expose employees to trade secrets. To prevent employee misappropriation, firms offer incentive compatible wage premiums based on their individual exposure and the common level of legal protection. Entry selection into the international market generates an endogenous distribution of firm specific wages and positive unemployment in equilibrium. I find that stronger protection stimulates multinational investment and increases aggregate productivity. However, distributional effects leave many workers worse-off.

Suggested Citation

  • Klein, Michael A., 2023. "Trade secret protection, multinational firms and international trade," International Economics, Elsevier, vol. 173(C), pages 325-342.
    • Handle: RePEc:eee:inteco:v:173:y:2023:i:c:p:325-342
    DOI: 10.1016/j.inteco.2023.01.007
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade secrets; Intellectual property rights; Multinational firms; Development;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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