Trade Secrets in Collaborative Research Agreements Between Universities and Industry

Abstract

We review the agreements of 483 collaborative research projects between universities and industry. We find that only a subset, 52 of the agreements, allows for the use of trade secrets and lead time advantage, the preferred appropriation mechanisms by industry. We explore this gap by first reviewing the literature on appropriation mechanisms. We explain trade secrets and how lead time advantage is a confused and composite concept. In the empirical part, we use cross-tabulations to study the characteristics of the projects in the subset. We connect how appropriation mechanisms work, with academic secrecy and the theory of incomplete contracts. We conclude with propositions for managers and policymakers on the use of trade secrets in collaborative research.