Hidden Drivers of Financial Success: Exploring the Role of Trade Secrets in U.S. Corporate Performance

This study aims to analyze the impact of trade secrets, i.e., intangible assets, patents, on an entity’s financial performance in respect of varying elements, e.g., revenue, leverage, capex, especially the profitability measured in terms of return on assets. We used a dataset of US firms and statistical and econometric methods, including regression analysis, multicollinearity test, endogeneity & robustness tests, were employed during this research to study the impact of ownership of trade secrets on a firm’s performance, and the dataset used consisted of an unbalanced panel of US firms. The outcome of this study establishes that the entities that own trade secrets tend to be more profitable as compared to those that do not. More specifically, a directly proportional relationship also exists between the amounts of trade secrets owned by a firm versus its return on assets. Further, regardless of the selected model, the use of robustness checks also establishes the validity of these findings, which solidifies the importance of trade secrets being a source of competitive advantage and profitability for the firm.