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The role of patents and secrecy for intellectual property protection: theory and evidence

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  • Malte Mosel

Abstract

Traditionally patents are seen as the gold standard for intellectual property protection. But, in line with empirical findings that secrecy is considered more important for appropriating returns, recent theories predict that firms keep their most important inventions secret. This article reconciles both opposing views in a unifying framework, accounting for the main aspects causing the discrepancy: imperfect protection, patenting costs, and simultaneous innovations. Theoretical results on the relation between patenting and innovation size are then confronted with survey data for small European firms. Using a binary size measure, we find strong support for the traditional view that firms patent their most important innovations, but a continuous size measure reveals an inverted-U relation between patenting and size, as predicted by the unifying framework.

Suggested Citation

  • 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).
  • Handle: RePEc:bav:wpaper:117_mosel
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    File URL: http://www.bgpe.de/texte/DP/117_Mosel.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Filing fees; imitation; innovation; probabilistic patent rights; R&D; simultaneous innovation; trade secrets;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • 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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