Firms that don’t protect their innovation risk losing much of the value they create. That’s why intellectual property protection (IPP) is a key component in the strategy of both established enterprises and early-stage startups.
How Trade Secrets Hurt Innovation
They restrict employee mobility.
January 29, 2019
Tim Robberts/Getty Images
Summary.
Trade secrecy, where companies choose not to disclose information about their inventions, is considered an increasingly important defense strategy and source of competitive advantage. One of the primary ways that employers seek to protect trade secrets is by having employees sign non-compete contracts and non-disclosure agreements – these aim to prevent employees from moving to competitors and from disclosing valuable information to new employers. But while greater trade secrecy may protect existing innovations, it’s not clear how this might affect future innovation. In a recent study, researchers examine this issue, and find that strengthening employers’ trade secrecy protection can backfire by dampening inventors’ productivity and hurting innovation in the long run.