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Firm size and trade secret intensity: evidence from the Economic Espionage Act

  • Nicola C Searle
  • Gavin C Reid

This paper considers trade secrecy as an appropriation mechanism in the context of the US Economic Espionage Act (EEA) 1996. We examine the relation between trade secret intensity and firm size, using a cross section of 95 court cases. The paper builds on extant work in three respects. First, we create a unique body of evidence, using EEA prosecutions from 1996 to 2008. Second, we use an econometric approach to measurement, estimation and hypothesis testing. This allows us comprehensively to test the robustness of findings. Third, we focus on objectively measured valuations, instead of the subjective, self-reported values used elsewhere. We find a stable, robust value for the elasticity of trade secret intensity with respect to firm size, which indicates that a 10% reduction in firm size leads to a 7% increase in trade secret intensity. We find that this result is not sensitive to industrial sector, sample trimming, or functional form.

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Paper provided by Centre for Research into Industry, Enterprise, Finance and the Firm in its series CRIEFF Discussion Papers with number 1203.

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Handle: RePEc:san:crieff:1203
Contact details of provider: Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL
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  1. Lunn, John E, 1986. "An Empirical Analysis of Process and Product Patenting: A Simultaneous Equation Framework," Journal of Industrial Economics, Wiley Blackwell, vol. 34(3), pages 319-30, March.
  2. Scherer, F. M., 1983. "The propensity to patent," International Journal of Industrial Organization, Elsevier, vol. 1(1), pages 107-128, March.
  3. Mansfield, Edwin & Schwartz, Mark & Wagner, Samuel, 1981. "Imitation Costs and Patents: An Empirical Study," Economic Journal, Royal Economic Society, vol. 91(364), pages 907-18, December.
  4. 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.
  5. Lerner, Josh, 1995. "Patenting in the Shadow of Competitors," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 463-95, October.
  6. Bronwyn H. Hall & Christian Helmers & Mark Rogers & Vania Sena, 2012. "The Choice between Formal and Informal Intellectual Property: A Literature Review," NBER Working Papers 17983, National Bureau of Economic Research, Inc.
  7. Edwin Mansfield, 1986. "Patents and Innovation: An Empirical Study," Management Science, INFORMS, vol. 32(2), pages 173-181, February.
  8. Sabourin, David & Baldwin, John R. & Hanel, Peter, 2000. "Determinants of Innovative Activity in Canadian Manufacturing Firms: The Role of Intellectual Property Rights," Analytical Studies Branch Research Paper Series 2000122e, Statistics Canada, Analytical Studies Branch.
  9. Paul H. Jensen & Elizabeth Webster, 2006. "Firm Size and the Use of Intellectual Property Rights," The Economic Record, The Economic Society of Australia, vol. 82(256), pages 44-55, 03.
  10. Bosworth, Derek & Rogers, Mark, 2001. "Market Value, R&D and Intellectual Property: An Empirical Analysis of Large Australian Firms," The Economic Record, The Economic Society of Australia, vol. 77(239), pages 323-37, December.
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