Want More Innovation? Stronger Trade Secret Laws Help
Stronger trade secret law eases the "knowledge leakage trap": firms deploy more secret innovations and source secrets from partners, while patenting and disclosed novelty hold steady, so secrecy and openness complement rather than substitute.
Summary
Kapacinskaite and Cunningham use the 2016 Defend Trade Secrets Act as a quasi-natural experiment across 47,000+ US fracking wells (2014-2018). In Arkansas, Louisiana and Pennsylvania, where the legal shift was largest, the share of wells with at least one trade secret ingredient rose 22 points, and secret-ingredient wells produced 26% more oil and 6% more gas. Firms did not cut patenting or disclosed novel ingredients, and sourced more secrets from third parties. Executives should treat secrecy as a complement to patents, especially for hard-to-reverse-engineer "complex recipes".
Editor's opinion
Rigorous causal design, but a patent/trade-secret-law mechanism paper (fracking wells) isn't a firm-strategy lever.
Key concepts
knowledge leakage trap · Defend Trade Secrets Act · quasi-natural experiment · complex recipes · secrecy as catalyst · secrecy-patenting complementarity