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Big patents, small secrets: how firms protect inventions when R&D outcome is heterogeneous

  • Malte Mosel
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    Patents have long been regarded as the ‘gold standard’ of intellectual property protection. In “Little patents and big secrets: managing intellectual property”, Anton and Yao (2004) call this traditional view into question by finding that firms keep their most important innovations secret. This model modifies key assumptions made by Anton and Yao by accounting for patenting costs, patentability standards, and the fact that patents provide protection in competitive situations where secrecy fails. The latter aspect counteracts the empirically substantiated fact that, in situations where both appropriation mechanisms are applicable, secrecy provides more protection. It is found that firms keep small inventions secret, use both mechanisms for medium inventions, and patent their most important innovations. This result reestablishes the traditional view that patents are crucial to provide R&D incentives and is yet consistent with main empirical findings on the issue.

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    File URL: http://www.bgpe.de/texte/DP/105_Mosel.pdf
    File Function: First version, 2011
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    Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 105.

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    Length: 36 pages
    Date of creation: Sep 2011
    Date of revision:
    Handle: RePEc:bav:wpaper:105_mosel
    Contact details of provider: Web page: http://www.bgpe.de/

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