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A Theory of Trade Secrets in Firms

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  • J·n Z·bojnÌk

    (University of Southern California, USA)

Abstract

This article provides a simple theoretical model of trade secrets in hierarchical firms. A crucial assumption is that each manager has access to trade secrets pertaining to his own hierarchical level as well as to all lower levels. The article explores some implications of this assumption for optimal degree of trade secrets accumulation and protection as well as for the wage structure in firms. In addition, the model implies that managers may have an incentive to overpay their subordinates and protect their firms' trade secrets too much. Copyright Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association

Suggested Citation

  • J·n Z·bojnÌk, 2002. "A Theory of Trade Secrets in Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(3), pages 831-855, August.
    • Handle: RePEc:ier:iecrev:v:43:y:2002:i:3:p:831-855
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    Citations

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    Cited by:

    1. Razin, Ronny & Baccara, Mariagiovanna, 2004. "Curb Your Innovation: Corporate Conservatism in the Presence of Imperfect Intellectual Property Rights," CEPR Discussion Papers 4466, C.E.P.R. Discussion Papers.
    2. Delerue, Hélène & Lejeune, Albert, 2011. "Managerial secrecy and intellectual asset protection in SMEs: The role of institutional environment," Journal of International Management, Elsevier, vol. 17(2), pages 130-142, June.
    3. Fosfuri, Andrea & Rønde, Thomas, 2003. "High-Tech Clusters, Technology Spillovers and Trade Secret Laws," CEPR Discussion Papers 4130, C.E.P.R. Discussion Papers.
    4. Dan Bernhardt & Vladimir Dvoracek, 2009. "Preservation Of Trade Secrets And Multinational Wage Premia," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 726-738, October.
    5. Mariagiovanna Baccaraa, 2004. "Outsourcing, Information Leakage and Consulting Firms," Working Papers 04-19, New York University, Leonard N. Stern School of Business, Department of Economics.
    6. ICHIDA Toshihiro, 2013. "Imitation versus Innovation Costs: Patent policies under common patent length," Discussion papers 13054, Research Institute of Economy, Trade and Industry (RIETI).
    7. Kameshwari Shankar & Suman Ghosh, 2005. "Favorable Selection in the Labor Market: A Theory of Worker Mobility in R&D Intensive Industries," Working Papers 05006, Department of Economics, College of Business, Florida Atlantic University.
    8. John Asker & Alexander Ljungqvist, 2010. "Competition and the Structure of Vertical Relationships in Capital Markets," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 599-647, June.
    9. Ekinci, Emre, 2022. "Employee entrepreneurship and signaling role of corporate venturing decisions," Labour Economics, Elsevier, vol. 79(C).
    10. Marini, Marco A., 2006. "The value of a new idea: knowledge transmission, workers’ mobility and market structure," Chaos, Solitons & Fractals, Elsevier, vol. 29(3), pages 697-706.
    11. Chrysovalantou Milliou, 2009. "Endogenous protection of R&D investments," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 184-205, February.
    12. John Asker, 2006. "Sharing Investment Bankers," Working Papers 06-23, New York University, Leonard N. Stern School of Business, Department of Economics.
    13. Klein, Michael A, 2020. "Trade Secret Protection in a Developing Economy," MPRA Paper 103360, University Library of Munich, Germany.
    14. Syed Anwar & Susan Tariq, 2011. "Evolution of entrepreneurship and organizational configurations at Zildjian, 1623–2010," Journal of International Entrepreneurship, Springer, vol. 9(3), pages 175-194, September.
    15. Fosfuri, Andrea & Ronde, Thomas, 2004. "High-tech clusters, technology spillovers, and trade secret laws," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 45-65, January.
    16. Bernales, Alejandro & Beuermann, Diether W. & Cumming, Douglas & Olid, Christian, 2023. "Blue-Collar Crime and Finance," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 83(C).
    17. Mariagiovanna Baccara, 2007. "Outsourcing, information leakage, and consulting firms," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 269-289, March.
    18. Ronny Razin & Mariagiovanna Baccara, 2008. "Bargaining Over New Ideas: Rent Distribution and Stability of Innovative Firms," Working Papers 08-6, New York University, Leonard N. Stern School of Business, Department of Economics.
    19. Senyuta, Olena & Žigić, Krešimir, 2016. "Managing spillovers: An endogenous sunk cost approach," Information Economics and Policy, Elsevier, vol. 35(C), pages 45-64.
    20. Philip Auerswald, 2010. "Entry and Schumpeterian profits," Journal of Evolutionary Economics, Springer, vol. 20(4), pages 553-582, August.
    21. Klein, Michael A., 2023. "Trade secret protection, multinational firms and international trade," International Economics, Elsevier, vol. 173(C), pages 325-342.

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