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Visibility of Technology and Cumulative Innovation: Evidence from Trade Secrets Laws

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  • Bernhard Ganglmair
  • Imke Reimers

Abstract

We use exogenous variation in the strength of trade secrets protection to show that a relative weakening of patents (compared to trade secrets) has a disproportionately negative effect on the disclosure of processes - inventions that are not otherwise visible to society. We develop a structural model of initial and follow-on innovation to determine the effects of such a shift in disclosure on overall welfare in industries characterized by cumulative innovation. We find that while stronger trade secrets encourage investment in R&D, they may have negative effects on overall welfare - the result of a significant decline in follow-on innovation.

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  • Bernhard Ganglmair & Imke Reimers, 2019. "Visibility of Technology and Cumulative Innovation: Evidence from Trade Secrets Laws," CRC TR 224 Discussion Paper Series crctr224_2019_119v1, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2019_119v1
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    Cited by:

    1. Rammer, Christian, 2022. "Measuring process innovation output: Results from firm-level panel data," ZEW Discussion Papers 22-002, ZEW - Leibniz Centre for European Economic Research.
    2. Daniel P. Gross, 2023. "The Hidden Costs of Securing Innovation: The Manifold Impacts of Compulsory Invention Secrecy," Management Science, INFORMS, vol. 69(4), pages 2318-2338, April.
    3. Danzer, Alexander M. & Feuerbaum, Carsten & Gaessler, Fabian, 2020. "Labor Supply and Automation Innovation," IZA Discussion Papers 13429, Institute of Labor Economics (IZA).
    4. de Rassenfosse, Gaétan & Pellegrino, Gabriele & Raiteri, Emilio, 2024. "Do patents enable disclosure? Evidence from the invention secrecy act," International Journal of Industrial Organization, Elsevier, vol. 92(C).
    5. Rammer, Christian, 2023. "Measuring process innovation output in firms: Cost reduction versus quality improvement," Technovation, Elsevier, vol. 124(C).

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    More about this item

    Keywords

    cumulative innovation; disclosure; self-disclosing inventions; Uniform Trade Secrets Act;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • 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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