American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
The Paradox of Innovation Nondisclosure: Evidence from Licensing Contracts
American Economic Journal: Applied Economics
vol. 16,
no. 4, October 2024
(pp. 220–56)
Abstract
Innovative firms must trade off disclosing to investors and maintaining secrecy from competitors. We study this trade-off in a sample of IP licenses mandatorily disclosed by US public firms, whose contents can be temporarily redacted. Hand classifying the redacted information, we find that firms with valuable IP in competitive markets redact IP information more often. Markets react positively to the redaction of IP information, consistent with theoretical predictions rationalizing a separating equilibrium in which nondisclosure signals more valuable IP. Our results suggest that credible nondisclosure partially resolves information frictions for innovative public firms when facilitated by sophisticated investors.Citation
Kankanhalli, Gaurav, Alan Kwan, and Kenneth Merkley. 2024. "The Paradox of Innovation Nondisclosure: Evidence from Licensing Contracts." American Economic Journal: Applied Economics, 16 (4): 220–56. DOI: 10.1257/app.20230046Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- D82 Asymmetric and Private Information; Mechanism Design
- G38 Corporate Finance and Governance: Government Policy and Regulation
- L24 Contracting Out; Joint Ventures; Technology Licensing
- O32 Management of Technological Innovation and R&D
- O34 Intellectual Property and Intellectual Capital
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