Trade secret protection, multinational firms and international trade

Multinational firms indicate that the threat of trade secret misappropriation by current and former employees remains a substantial impediment to conducting business in emerging markets. In this paper, I examine the economic implications of strengthening international standards in trade secret prote...

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Bibliographic Details
Published inInternational economics (Paris) Vol. 173; pp. 325 - 342
Main Author Klein, Michael A.
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.05.2023
Subjects
Development
Intellectual property rights
Multinational firms
Trade secrets
O34
Trade secrets
F23
Multinational firms
Development
F16
Intellectual property rights
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Summary:Multinational firms indicate that the threat of trade secret misappropriation by current and former employees remains a substantial impediment to conducting business in emerging markets. In this paper, I examine the economic implications of strengthening international standards in trade secret protection. I develop a general equilibrium model featuring heterogeneous firms that differ in the degree to which they must expose employees to trade secrets. To prevent employee misappropriation, firms offer incentive compatible wage premiums based on their individual exposure and the common level of legal protection. Entry selection into the international market generates an endogenous distribution of firm specific wages and positive unemployment in equilibrium. I find that stronger protection stimulates multinational investment and increases aggregate productivity. However, distributional effects leave many workers worse-off.
ISSN:2110-7017
DOI:10.1016/j.inteco.2023.01.007