IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/127530.html

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

Author

Listed:
  • Ali, Amjad
  • Jabeen, Riffat
  • Ahmad, Khalil

Abstract

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.

Suggested Citation

  • 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.
    • Handle: RePEc:pra:mprapa:127530
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/127530/1/MPRA_paper_127530.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Exadaktylos, Dimitrios & Ghodsi, Mahdi & Rungi, Armando, 2024. "What do firms gain from patenting? The case of the global ICT industry," Technological Forecasting and Social Change, Elsevier, vol. 208(C).
    2. Morikawa, Masayuki, 2019. "Innovation in the service sector and the role of patents and trade secrets: Evidence from Japanese firms," Journal of the Japanese and International Economies, Elsevier, vol. 51(C), pages 43-51.
    3. Bronwyn H. Hall, 2005. "Exploring the Patent Explosion," Springer Books, in: Albert N. Link & F. M. Scherer (ed.), Essays in Honor of Edwin Mansfield, pages 195-208, Springer.
    4. Guernsey, Scott & John, Kose & Litov, Lubomir P., 2022. "Actively Keeping Secrets From Creditors: Evidence From the Uniform Trade Secrets Act," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 57(7), pages 2516-2558, November.
    5. Jian-Hang Wang & Yu-Hsien Wu & Phil Yihsing Yang & Hsiang-Yi Hsu, 2023. "Sustainable Innovation and Firm Performance Driven by FinTech Policies: Moderating Effect of Capital Adequacy Ratio," Sustainability, MDPI, vol. 15(11), pages 1-15, May.
    6. Mark F. Schultz & Douglas C. Lippoldt, 2014. "Approaches to Protection of Undisclosed Information (Trade Secrets): Background Paper," OECD Trade Policy Papers 162, OECD Publishing.
    7. Javier Ortiz & Ana Gargallo-Castel, 2025. "Innovation and firm performance: influence of ownership and professionalization," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 34(4), pages 513-535, May.
    8. Okharedia Goodheart Akhimien & Alasa Paul Kadiri, 2022. "Green Human Resource Practices And Environmental Performance Of Firms: A Review Of Literature And Research Agenda," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 7(2), pages 26-34, September.
    9. 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.
    10. 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.
    11. 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.
    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. Sattar, Sarmad & Alvi, Aramish Altaf & Audi, Marc, 2025. "Economic, Social, and Institutional Drivers of FDI: A Comparative Study of Developed and Developing Economies," MPRA Paper 127562, University Library of Munich, Germany.

    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. Liu, Andrew Yizhou, 2025. "Trade secrets protection and employment of public firms: Evidence from the Uniform Trade Secrets Act," Research Policy, Elsevier, vol. 54(6).
    2. Hussinger, Katrin & Issah, Wunnam Basit, 2025. "Patents, trade secrets and performance aspirations in family firms," Journal of Business Research, Elsevier, vol. 196(C).
    3. 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).
    4. repec:osf:socarx:qzmf8_v1 is not listed on IDEAS
    5. de Rassenfosse, Gaétan, 2013. "Do firms face a trade-off between the quantity and the quality of their inventions?," Research Policy, Elsevier, vol. 42(5), pages 1072-1079.
    6. Katrin Hussinger, 2026. "Did the Defend Trade Secrets Act Spur the Reliance on Trade Secrets?," DEM Discussion Paper Series 26-06, Department of Economics at the University of Luxembourg.
    7. Iain M. Cockburn & Megan J. MacGarvie, 2011. "Entry and Patenting in the Software Industry," Management Science, INFORMS, vol. 57(5), pages 915-933, May.
    8. Dietmar Harhoff & Georg von Graevenitz & Stefan Wagner, 2016. "Conflict Resolution, Public Goods, and Patent Thickets," Management Science, INFORMS, vol. 62(3), pages 704-721, March.
    9. Yanyi Ye & Yun Wang & Xiaoguang Yang, 2022. "Bank loan information and information asymmetry in the stock market: evidence from China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-28, December.
    10. Archibugi, Daniele & Mariella, Vitantonio & Vezzani, Antonio, 2025. "What next? Nations in the technological race through the 2030," Technological Forecasting and Social Change, Elsevier, vol. 212(C).
    11. 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.
    12. Luigi Alberto Franzoni, 2020. "Trade secrets law," Working Papers wp1150, Dipartimento Scienze Economiche, Universita' di Bologna.
    13. William R Kerr, 2018. "Heterogeneous Technology Diffusion and Ricardian Trade Patterns," The World Bank Economic Review, World Bank, vol. 32(1), pages 163-182.
    14. Tuo, Ling & Rezaee, Zabihollah & Gao, Lei, 2024. "Is there a tradeoff between management earnings forecasts and sustainability reporting?," Global Finance Journal, Elsevier, vol. 59(C).
    15. Dan Hu & Eunju Lee & Bingxin Li, 2023. "Trade secrets protection and stock price crash risk," The Financial Review, Eastern Finance Association, vol. 58(2), pages 395-421, May.
    16. Bedford, Anna & Ma, Le & Ma, Nelson & Vojvoda, Kristina, 2022. "Australian innovation: Patent database construction and first evidence," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    17. Veronika Frigyesi & Patrice Laget & Mark Boden, 2019. "Exploitation of patent information in R&D output analysis for policymaking," Scientometrics, Springer;Akadémiai Kiadó, vol. 121(3), pages 1717-1736, December.
    18. Sanghoon Ahn & Bronwyn H. Hall & Keun Lee (ed.), 2014. "Intellectual Property for Economic Development," Books, Edward Elgar Publishing, number 15464, June.
    19. Gaétan de Rassenfosse & Adam B. Jaffe, 2018. "Are patent fees effective at weeding out low‐quality patents?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(1), pages 134-148, March.
    20. Tseng, Kevin, 2022. "Learning from the Joneses: Technology spillover, innovation externality, and stock returns," Journal of Accounting and Economics, Elsevier, vol. 73(2).
    21. 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.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:pra:mprapa:127530. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.