Losing the lead: the patenting decision in the light of the disclosure requirement

Zaby, Alexandra

doi:10.1080/10438590802492836

Cited by 38 publications

(35 citation statements)

References 20 publications

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“…Secrecy works better for incremental than for radical innovations, especially if consumer switching costs are high and market lead time is critical. Some research suggests that secrecy benefits radical innovations, because patent applications must disclose valuable information before product launch that competitors can use to start inventing around the innovation (Zaby, 2010), but the wider consensus suggests that radical innovations more easily meet the non-evident improvement requirement, and patent protection advantages outweigh the benefits created by market lead times (Cohen et al, 2000). Finally, secrecy is a more effective appropriation method for products with relatively short life cycles (Blind & Thumm, 2004).…”

Section: Innovation Factorsmentioning

confidence: 97%

A dynamic view on secrecy management

Bos

Broekhuizen²,

Faria³

2015

Journal of Business Research

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a b s t r a c t Available online xxxxKeywords: Secrecy Innovation Appropriability Secrecy management lifecycle Purpose -The current study provides a literature review on secrecy as mechanism for appropriating value from innovation. It synthesizes previous findings into a framework that can explain the advantages of exercising secrecy versus patenting. It also examines the management lifecycle of secrecy. Design/methodology/approach -It takes a dynamic perspective and suggests a four-stage secrecy management lifecycle: creation of secret, installation of preventive mechanisms, protection and exploitation, and minimization of leakage. Findings -Based on the four stages, the study highlights under-researched areas, and develops a future research agenda for secrecy management. Originality/value -Despite the managerial and academic relevance of this topic, extant research does not offer a comprehensive framework for the concept of secrecy. This study provides a dynamic perspective to highlight the important aspects of secrecy management during the lifecycle of secrets.

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Section: Innovation Factorsmentioning

confidence: 97%

A dynamic view on secrecy management

Bos

Broekhuizen²,

Faria³

2015

Journal of Business Research

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“…By this the decision to patent is analyzed in the context of the competitive environment of firms. The first part of the paper is dedicated to a brief presentation of a theoretical model (Zaby, 2010b) from which we draw our testable predictions. In the second empirical part of the paper, we present empirical evidence for these predictions.…”

Section: Resultsmentioning

confidence: 99%

“…The model presented in this section is a condensed version of the model presented in Zaby (2010b). In a setting of dynamic vertical product differentiation, a successful inventor decides between a patent or secrecy in order to protect his invention, before determining the timing of his market entry.…”

Section: The Theoretical Modelmentioning

confidence: 99%

“…Naturally, the positive effect may be enhanced by stronger property rights while the negative effect is subject to the impact of the disclosure requirement. Our analysis consists of a theoretical part, which is a condensed version of Zaby (2010b), and an empirical test of the theoretical predictions. 1 For an investigation of the heterogenous costs of disclosure via patenting see Heger and Zaby (2013).…”

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confidence: 99%

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A Look at Both Sides of the Coin: Investigating the Protective and the Disclosure Effect of Patenting

Heger

Zaby

2013

SSRN Journal

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Non-technical summaryWe investigate the opposing impacts of two basic effects underlying the decision to patent: the protective and the disclosure effect. On the one hand, patents grant a temporary monopoly to an inventor, and thus, have a positive protective effect. On the other hand, patent law requires the full disclosure of all technological details concerning a patented discovery. As this transfer of enabling knowledge benefits rival firms the profits of the innovator may decrease. Hence, the patenting decision of an inventor has to balance the tradeoff between the benefits of temporary monopoly power, and the drawback of the disclosure. Naturally, the positive effect may be enhanced by stronger property rights while the negative effect is subject to the impact of the disclosure requirement. The presented analysis consists of a theoretical part which is a condensed version of Zaby (2010b) and an empirical test of the theoretical predictions. The theoretical model introduces the patenting decision of a successful inventor into a market with vertically differentiated products. The two considered firms are asymmetric in their capabilities to adopt a new technology. Preceding the adoption decision an inventor faces the choice between a patent and secrecy to protect his discovery. A patent protects a given quality range from the entry of a rival. The main theoretical result is that the inventor will patent his invention whenever his technological headstart is moderate and that he will rather rely on secrecy whenever his technological headstart is high.The empirical analyzes test predictions derived from the theoretical results. Empirical evidence supports the theoretical finding that the validity of a common economic intuition regarding the interplay of technological leadership and the propensity to patent is restricted to industry-specific characteristics: Our findings suggest that the propensity to patent increases with the extent of the technological leadership of an inventor only in industry sectors where the appropriability of an invention, given secrecy as the chosen protective measure, is low. This leads to an increase of the propensity to patent, as the positive protective effect of patenting gains weight. Furthermore, we find evidence that the strength of patent protection has a mitigating effect on the market entry threat perceived by an inventor, so stronger patents may lead to an increasing propensity to patent.Summarizing, this paper provides a poss...

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“…One possible reason could be that entrepreneurs conducting innovative businesses may have low incentives to disclose information to investors, including banks, since firms’ strategic plans may be eventually revealed to competitors (Bhattacharya and Ritter, ; Cohen et al ., ; Carpenter and Petersen, ; Zaby, ). Therefore, in such a context, investors face difficulties in distinguishing good projects from bad ones (adverse selection), which make credit rationing a serious concern (Jaffee and Russell, ; Stiglitz and Weiss, ).…”

Section: Literature Backgroundmentioning

confidence: 99%

Access to Credit for Small Innovative Businesses

et al. 2017

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Using data for a large sample of small firms collected through the 8th UniCredit Survey conducted in 2011, we investigate the extent to which banks of different size reward innovative firms, in terms of both access to lending and volume of credit granted. We find that more innovative firms are associated with weak credit rationing. Using instrumental variable techniques to manage the endogenous nature of innovation, we show that a large bank more strongly supports product innovation, whereas there is no substantial difference in the extent to which small and large banks provide credit to small firms undertaking process innovations

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Losing the lead: the patenting decision in the light of the disclosure requirement

Cited by 38 publications

References 20 publications

A dynamic view on secrecy management

A dynamic view on secrecy management

A Look at Both Sides of the Coin: Investigating the Protective and the Disclosure Effect of Patenting

Access to Credit for Small Innovative Businesses

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