IDEAS home Printed from https://ideas.repec.org/a/kap/jeczfn/v115y2015i1p49-71.html

Economic growth under two forms of intellectual property rights protection: patents and trade secrets

Author

Listed:
  • Keishun Suzuki

Abstract

This paper analyzes the effects on growth of strengthened patent protections, where trade secrets are introduced as an additional protection method. Strengthening patent protection decreases the amount of common knowledge, which has two asymmetric effects on incentives to innovate. First, as competitors cannot freely use technological information, it helps successful innovators earn higher profits. Second, less disclosure of information reduces R&D productivity. The model shows that the relative importance of patents versus trade secrets determines whether the former positive effect dominates the latter negative effect. As a result, strengthened patent protection can increase economic growth when the risk of leakage of trade secrets is high. Conversely, when the risk is low, stronger patent protection hinders growth. Similar opposing results are also found in welfare analysis. Copyright Springer-Verlag Wien 2015

Suggested Citation

  • Keishun Suzuki, 2015. "Economic growth under two forms of intellectual property rights protection: patents and trade secrets," Journal of Economics, Springer, vol. 115(1), pages 49-71, May.
    • Handle: RePEc:kap:jeczfn:v:115:y:2015:i:1:p:49-71
    DOI: 10.1007/s00712-014-0410-8
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s00712-014-0410-8
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s00712-014-0410-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Rod Falvey & Neil Foster & David Greenaway, 2006. "Intellectual Property Rights and Economic Growth," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 700-719, November.
    2. Elisabetta Ottoz & Franco Cugno, 2008. "Patent--Secret Mix in Complex Product Firms," American Law and Economics Review, American Law and Economics Association, vol. 10(1), pages 142-158.
    3. Alireza Naghavi & Julia Spies & Farid Toubal, 2014. "Intellectual Property Rights, Product Complexity, and the Organization," Working Papers 2014-07, CEPII research center.
    4. Horowitz, Andrew W & Lai, Edwin L-C, 1996. "Patent Length and the Rate of Innovation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 785-801, November.
    5. Wesley M. Cohen & Richard R. Nelson & John P. Walsh, 2000. "Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)," NBER Working Papers 7552, National Bureau of Economic Research, Inc.
    6. Tuomas Takalo, 1998. "Innovation and imitation under imperfect patent protection," Journal of Economics, Springer, vol. 67(3), pages 229-241, October.
    7. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(1), pages 43-61.
    8. Thomä, Jörg & Bizer, Kilian, 2013. "To protect or not to protect? Modes of appropriability in the small enterprise sector," Research Policy, Elsevier, vol. 42(1), pages 35-49.
    9. Arundel, Anthony, 2001. "The relative effectiveness of patents and secrecy for appropriation," Research Policy, Elsevier, vol. 30(4), pages 611-624, April.
    10. Edwin Mansfield, 1986. "Patents and Innovation: An Empirical Study," Management Science, INFORMS, vol. 32(2), pages 173-181, February.
    11. Futagami, Koichi & Iwaisako, Tatsuro, 2007. "Dynamic analysis of patent policy in an endogenous growth model," Journal of Economic Theory, Elsevier, vol. 132(1), pages 306-334, January.
    12. Arundel, Anthony & Kabla, Isabelle, 1998. "What percentage of innovations are patented? empirical estimates for European firms," Research Policy, Elsevier, vol. 27(2), pages 127-141, June.
    13. Ryo Horii & Tatsuro Iwaisako, 2007. "Economic Growth with Imperfect Protection of Intellectual Property Rights," Journal of Economics, Springer, vol. 90(1), pages 45-85, January.
    14. James J. Anton & Dennis A. Yao, 2004. "Little Patents and Big Secrets: Managing Intellectual Property," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 1-22, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Darong Dai, 2018. "Intellectual property rights and R&D subsidies: are they complementary policies?," Journal of Economics, Springer, vol. 125(1), pages 27-49, September.
    2. Suzuki, Keishun, 2017. "Competition, Patent Protection, and Innovation in an Endogenous Market Structure," MPRA Paper 77133, University Library of Munich, Germany.
    3. Klein, Michael A., 2022. "The reward and contract theories of patents in a model of endogenous growth," European Economic Review, Elsevier, vol. 147(C).
    4. Klein, Michael A., 2020. "Secrecy, the patent puzzle and endogenous growth," European Economic Review, Elsevier, vol. 126(C).
    5. Sumiko Niwa, 2018. "Effects of a blocking patent on R&D with endogenous survival activities," Journal of Economics, Springer, vol. 125(3), pages 263-277, November.
    6. Ali, Amjad & Jabeen, Riffat & Ahmad, Khalil, 2025. "Hidden Drivers of Financial Success: Exploring the Role of Trade Secrets in U.S. Corporate Performance," MPRA Paper 127530, University Library of Munich, Germany.
    7. Mindaugas Kiškis & Tadas Limba & Gintarė Gulevičiūtė, 2016. "Business value of Intellectual Property in Biotech SMEs: case studies of Lithuanian and Arizona’s (US) firms," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 4(2), pages 221-234, December.
    8. Suzuki, Keishun, 2020. "Patent Protection, Optimal Licensing, And Innovation With Endogenous Entry," Macroeconomic Dynamics, Cambridge University Press, vol. 24(8), pages 2033-2059, December.
    9. Keishun Suzuki, 2020. "Competition, patent protection, and innovation with heterogeneous firms in an endogenous market structure," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 729-750, June.
    10. Cowan, Robin & Jonard, Nicolas & Samson, Ruth, 2024. "Strategies of search and patenting under different IPR regimes," MERIT Working Papers 2024-008, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    11. Suzuki, Keishun, 2020. "Patent Puzzle, Inflation, and Internal Financial Constraint," MPRA Paper 101937, University Library of Munich, Germany.
    12. Tetsugen Haruyama & Ken-ichi Hashimoto, 2020. "Innovators and imitators in a world economy," Journal of Economics, Springer, vol. 130(2), pages 157-186, July.
    13. Klein, Michael A. & Yang, Yibai, 2025. "Innovation, technology transfer and the international regulation of patents and trade secrets," Journal of Economic Behavior & Organization, Elsevier, vol. 236(C).
    14. Man Yuan & Tengfei Yang, 2025. "Fostering Sustainable Development: How Local Fiscal Sustainability Enhances High-Quality Corporate Innovation in China," Sustainability, MDPI, vol. 17(21), pages 1-26, October.
    15. Akimoto, Kiyoka & Morimoto, Takaaki, 2020. "Examination and Approval of New Patents in an Endogenous Growth Model," Economic Modelling, Elsevier, vol. 91(C), pages 100-109.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Crass, Dirk & Garcia Valero, Francisco & Pitton, Francesco & Rammer, Christian, 2016. "Protecting innovation through patents and trade secrets: Determinants and performance impacts for firms with a single innovation," ZEW Discussion Papers 16-061, ZEW - Leibniz Centre for European Economic Research.
    2. Ayerbe, Cécile & Boulos, Caroline & Castellaneta, Francesco, 2024. "Navigating protection mechanisms and innovation models: A literature-based configurational framework of intellectual property strategies," Technovation, Elsevier, vol. 137(C).
    3. Thomä Jörg & Zimmermann Volker, 2013. "Knowledge Protection Practices in Innovating SMEs," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 233(5-6), pages 691-717, October.
    4. Malte Mosel, 2012. "The role of patents and secrecy for intellectual property protection: theory and evidence," Working Papers 117, Bavarian Graduate Program in Economics (BGPE).
    5. Glaeser, Stephen, 2018. "The effects of proprietary information on corporate disclosure and transparency: Evidence from trade secrets," Journal of Accounting and Economics, Elsevier, vol. 66(1), pages 163-193.
    6. Dirk Crass & Francisco Garcia Valero & Francesco Pitton & Christian Rammer, 2019. "Protecting Innovation Through Patents and Trade Secrets: Evidence for Firms with a Single Innovation," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 26(1), pages 117-156, January.
    7. Barros, Henrique M., 2008. "The interaction between patents and other appropriability mechanisms: firm-level evidence from UK manufacturing," Insper Working Papers wpe_105, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    8. Bronwyn Hall & Christian Helmers & Mark Rogers & Vania Sena, 2014. "The Choice between Formal and Informal Intellectual Property: A Review," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 375-423, June.
    9. Fontana, Roberto & Nuvolari, Alessandro & Shimizu, Hiroshi & Vezzulli, Andrea, 2013. "Reassessing patent propensity: Evidence from a dataset of R&D awards, 1977–2004," Research Policy, Elsevier, vol. 42(10), pages 1780-1792.
    10. Penin, Julien, 2005. "Patents versus ex post rewards: A new look," Research Policy, Elsevier, vol. 34(5), pages 641-656, June.
    11. 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.
    12. Sudipto Bhattacharya & Sergei Guriev, 2006. "Patents vs. Trade Secrets: Knowledge Licensing and Spillover," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1112-1147, December.
    13. Malte Mosel, 2009. "Competition, imitation, and R&D productivity in agrowth model with sector-specific patent protection," Working Papers 084, Bavarian Graduate Program in Economics (BGPE).
    14. Katrin Hussinger, 2006. "Is Silence Golden? Patents Versus Secrecy At The Firm Level," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 15(8), pages 735-752.
    15. Cysne, Rubens P. & Turchick, David, 2012. "Intellectual property rights protection and endogenous economic growth revisited," Journal of Economic Dynamics and Control, Elsevier, vol. 36(6), pages 851-861.
    16. Bos, Brenda & Broekhuizen, Thijs L.J. & de Faria, Pedro, 2015. "A dynamic view on secrecy management," Journal of Business Research, Elsevier, vol. 68(12), pages 2619-2627.
    17. Stephen Glaeser & Jeremy Michels & Robert E. Verrecchia, 2020. "Discretionary disclosure and manager horizon: evidence from patenting," Review of Accounting Studies, Springer, vol. 25(2), pages 597-635, June.
    18. Chu, Angus C. & Cozzi, Guido & Galli, Silvia, 2012. "Does intellectual monopoly stimulate or stifle innovation?," European Economic Review, Elsevier, vol. 56(4), pages 727-746.
    19. Barros, Henrique M., 2021. "Neither at the cutting edge nor in a patent-friendly environment: Appropriating the returns from innovation in a less developed economy," Research Policy, Elsevier, vol. 50(1).
    20. Dyer, Travis A. & Glaeser, Stephen & Lang, Mark H. & Sprecher, Caroline, 2024. "The effect of patent disclosure quality on innovation," Journal of Accounting and Economics, Elsevier, vol. 77(2).

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • 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
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jeczfn:v:115:y:2015:i:1:p:49-71. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.