Knowledge protection and modularity of innovation activities in firms: Evidence from US trade secrecy law
Stronger trade-secret law lets firms drop protective modularity in innovation and place new hires in central, connecting roles.
Summary
Using changes in US trade-secrecy law, the authors show that when firms worry less about protecting their knowledge, they move to less modular, more integrated innovation systems. New hires, both skilled and junior, are more often placed in central roles that connect different innovation communities inside the firm. The message is that concerns about protecting knowledge shape the internal structure of innovation, not just how much firms invest. The design compares firms across US states as the law changed.
Editor's opinion
Firms that fear leakage of their know-how organise innovation in walled-off modules, at the cost of integration. When the law makes knowledge easier to protect, they connect their innovation teams more tightly and put newcomers in central roles. Leaders should recognise that the way they structure R&D partly reflects a protection choice, and that a strong protection regime is what makes integrated innovation affordable.
Key concepts
knowledge protection · modularity · trade secrecy · innovation organisation