A Theory of Trade Secrets in Firms

Zábojník, Ján

doi:10.2139/ssrn.244573

Cited by 17 publications

(25 citation statements)

References 30 publications

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“…We capture this asymmetry by assuming that offers can be made only by informed agents. 12 1 0 For other papers that relate the possibility of employees' defection to the distribution of wages within the Þrm, see Stole and Zweibel (1994), Wolinsky (2000) and Zabojnik (2000). In particular, Zabojnik (2000) explores how hierarchical Þrms pay employees efficiency wages in accordance with the potential threat of their leaving the Þrm with relevant information.…”

Section: The Modelmentioning

confidence: 99%

“…To see this, notice that in any SP Equilibrium and any subgame h ∈ H N , the sum of the continuation values of the informed agents cannot be larger than δ, i.e., P i∈K(h) v i (h) ≤ δ. 31 If the strategies are symmetric, the continuation values of all the informed players must be equal. Because the pie is bounded in size, this means that when there are many informed agents, the continuation value of each agent must converge to zero.…”

Section: Lemmamentioning

confidence: 99%

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From Thought to Practice: Appropriation and Endogenous Market Structure with Imperfect Intellectual Property Rights

Baccara

Razin

2003

SSRN Journal

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We address the problem faced by innovators who have an idea for a marketable product but must hire employees to bring the product to the market. Information leakage implies that newly hired employees become informed of the idea and may attempt to bring the product to the market themselves. We develop a bargaining model to analyze this situation. In this model, employees' rents endogenously reßect the bargaining power vis-a-vis the Þrm which is due to the knowledge of the information. The model has a unique symmetric equilibrium in which the innovator appropriates a sizable share of the surplus despite the absence of property rights for ideas. We show that this share stays bounded away from zero even as the number of agents required in the development grows to inÞnity. We also derive the conditions under which monopoly or competition arise on the product market. We Þnd that when the degree of potential competition on the product market is high enough, a monopoly is generated by hiring all potential competitors within the same Þrm. Finally, the link between intellectual property rights enforcement and industry performance is explored, and normative implications are derived.

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Section: The Modelmentioning

confidence: 99%

Section: Lemmamentioning

confidence: 99%

From Thought to Practice: Appropriation and Endogenous Market Structure with Imperfect Intellectual Property Rights

Baccara

Razin

2003

SSRN Journal

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“…In particular, as all firms in this equilibrium outsource, the structure of this equilibrium is independent on the parameter t. Thus, even in a market populated by contractors that are as efficient as in-house production (i.e., t = 0), one of them can emerge as the monopolist of the market for information. 36 To conclude the analysis of the equilibrium with a market for information, let us focus on the observable and derive some implications on the structure of this market. In the equilibrium described in Proposition 5, the market segments into four different sets of firms: the ones which invest in technology, the ones who buy 35 It is easy to show that if s ∈ [s, n), two cases are possible.…”

Section: Equilibrium Analysis 351 Equilibrium If S >mentioning

confidence: 99%

“…If t < e T , only no leakage equilibria, similar to the s = n case one, are possible. 36 Of course, this is because with the extremely simple information aggregation assumptions we have, every single firm does not have any impact on the knowledge of the monopolistic contractor. Still, even in a situation in which every firm's technology has a (decreasing) impact on the knowledge of the contractor, we could support a similar equilibrium for an arbitrarily low t.…”

Section: Equilibrium Analysis 351 Equilibrium If S >mentioning

confidence: 99%

“…2 See Rajan and Zingales (2001), Zabojnik (2002), Baccara and Razin (2002) and Baccara and Bar-Isaac (2005) for analyses of situations in which a firm's employees (or former employees) can leak crucial information outside the firm. 3 Among others, see Feenstra (1998), Tempest (1996), Helper (1991), Abraham and Taylor (1996), Helpman (2000, 2001), World Trade Organization Report (1998).…”

Section: Introductionmentioning

confidence: 99%

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Outsourcing, Information Leakage and Consulting Firms

Baccara

2005

SSRN Journal

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This paper offers a general equilibrium model to analyze the problem of R&D investment of firms that also face the decision between outsourcing and in-house production in the presence of R&D information leakage. A contractor hired by a firm learns the firm's technology and can diffuse the information to other firms, either by selling it or by "spilling" it involuntarily. I find that information leakage concerns tend to concentrate the outsourcing market with respect to a situation in which information leakage is not present. In particular, despite the fact that the original outsourcing market is perfectly competitive, I find that when a market for information arises in equilibrium, such a market is always monopolistic. I show that a market for information arises when contractors have a positive but low degree of control on the information they hold. If contractors do not have any control on the information they hold, the market splits into a positive measure of technologically advanced firms that never outsource and a positive measure of low-tech firms that always outsource. If contractors have full information control, all firms invest in technology and outsource, and a market for information never arises. The structure of the equilibria of the model captures several features observable in the management consulting industry.

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High-tech clusters, technology spillovers, and trade secret laws

Fosfuri

Rønde

2004

International Journal of Industrial Organization

125

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We analyze firms' incentives to cluster in an industrial district to benefit from reciprocal technology spillovers. A simple model of cumulative innovation is presented, where technology spillovers arise endogenously through labor mobility. It is shown that firms' incentives to cluster are the strongest when the following three conditions are met: (1) the growth potential of an industry is high; (2) competition in the product market is relatively soft; (3) the probability of a single firm to develop an innovation is neither very high nor very low. Trade secret protection based on punitive damages is, except in some extreme cases, beneficial for firms' profits, stimulates clustering, and is not an impediment to technology spillovers.JEL classification: J3; K2; L1; O32; O34

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A Theory of Trade Secrets in Firms

Cited by 17 publications

References 30 publications

From Thought to Practice: Appropriation and Endogenous Market Structure with Imperfect Intellectual Property Rights

From Thought to Practice: Appropriation and Endogenous Market Structure with Imperfect Intellectual Property Rights

Outsourcing, Information Leakage and Consulting Firms

High-tech clusters, technology spillovers, and trade secret laws

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