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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Iwan Barankay, University of Pennsylvania (barankay@wharton.upenn.edu) and WZB Discussion papers of the WZB serve to disseminate the research results of work in progress prior to publication to encourage the exchange of ideas and academic debate. Inclusion of a paper in the discussion paper series does not constitute publication and should not limit publication in any other venue. The discussion papers published by the WZB represent the views of the respective author(s) and not of the institute as a whole. Terms of use: Documents inCopyright remains with the authors. AbstractTrade secrets and innovation: Evidence from the "inevitable disclosure" doctrine * Does heightened employer-friendly trade secrecy protection help or hinder innovation? By examining U.S. state-level legal adoption of a doctrine allowing employers to curtail inventor mobility if the employee would "inevitably disclose" trade secrets, we investigate the impact of a shifting trade secrecy regime on individual-level patenting outcomes. Using a difference-in-differences design taking un-affected U.S. inventors as the comparison group, we find strengthening employer-friendly trade secrecy adversely affects innovation. We then investigate why. We do not find empirical support for diminished idea recombination from suppressed inventor mobility as the operative mechanism. While shifting intellectual property protection away from patenting into trade secrecy has some explanatory power, our results are consistent with reduced individual-level incentives to signaling quality to the external labor market.

Research Summary: Does heightened employer-friendly trade secrecy protection help or hinder innovation? By examining U.S. state-level legal adoption of a doctrine allowing employers to curtail inventor mobility if the employee would "inevitably disclose" trade secrets, we investigate the impact of a shifting trade secrecy regime on individual-level patenting outcomes. Using a differencein-differences design taking unaffected U.S. inventors as the comparison group, we find strengthening employerfriendly trade secrecy adversely affects innovation. We then investigate why. We do not find empirical support for diminished idea recombination from suppressed inventor mobility as the operative mechanism. While shifting intellectual property protection away from patenting into trade secrecy has some explanatory power, our results are consistent with reduced individual-level incentives to signaling quality to the external labor market. Managerial Summary: While managers often list trade secrecy protection as their most important appropriation mechanism form and basis of competitive advantage (even more often than formal intellectual property protection), researchers have a hard time studying the effect of such secrets. We use a changing trade secrecy legal environment in some U.S. states (the introduction of the inevitable disclosure doctrine [IDD]) to study its effect on inventor-level innovation. We find that a strengthened employer-friendly trade secrecy regime adversely affects inventor-level innovation. While part of the effect is due to substituting trade secrecy protection for patents, we also find that inventors' diminished external labor market prospects may dampen their innovation output. Consequently, while employers may wish for strengthened trade secrecy protections, the results may paradoxically be against their innovation interests.

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Research Summary An important strategic choice for early‐stage ventures is about how to learn about the market. This choice often translates into focusing on either experimentation or planning. These strategies are best supported by different structures. Hence, the fit between strategy and structure should be considered by stakeholders evaluating the venture. We hypothesize that communicating coherent combinations—experimentation and informal structure or planning and formal structure—is positively associated with evaluation and that evaluators with entrepreneurial experience are more sensitive to this coherent choice. We test this argument combining data from a university‐based venture competition and an online experiment. We find a robust positive correlation between coherent choice and evaluation. We find no clear evidence that this pattern is driven by evaluators with entrepreneurial experience. Managerial Summary The Lean Startup suggests that entrepreneurs should rely on experimentation rather than the more traditional planning approach. However, the value of experimentation might depend on the structure the venture adopts. We ask whether the fit between strategy and structure plays a role in the context of venture evaluation. We analyze data from a university‐based venture competition and an online experiment. We find evidence that ventures communicating coherent choices—experimentation and informal structure or planning and formal structure—tend to be evaluated better than those communicating alternative choices. However, contrary to our expectation, this pattern does not appear to be driven by evaluators with entrepreneurial experience.