15/11/27 09:14:53.27 fcQw7oZ4.net
This paper proposes a model where firms invest in secrecy to limit technological spillovers accruing to their competitors,
in addition to investing in cost-reducing R&D. The main result of the paper is that increases in spillovers increase secrecy,
suggesting that legal and strategic protection are substitutes. Higher product differentiation is associated with higher levels of innovation and lower levels of secrecy.
An increase in the size of the market, a reduction in the cost of secrecy, or a reduction in the cost of R&D, all lead to an increase in secrecy.
As for the effect of spillovers on effective cost reduction, it is positive when products are sufficiently differentiated, and has an inverted-U shape with low product differentiation.
Compared to price competition, quantity competition yields higher levels of R&D, secrecy and effective cost reduction.