The heterogeneous costs of disclosure and the propensity to patent

This article explores whether the heterogeneous costs of disclosure induced by patenting can serve as an explanation for the empirically observed heterogeneity of the propensity to patent across firms. A theoretical model identifies the interplay between market entry barriers and the usefulness of the information disclosed through patenting for competitors as a crucial factor driving the extent of disclosure costs that a patenting firm faces. High costs of disclosure may outweigh the merits of patenting, leading innovators to rely on alternative protection strategies, such as secrecy. An empirical investigation using the German part of the CIS data provides evidence for these theoretical predictions.