The Real Effect of Knowledge Protection: Evidence from Strategic Alliances
62 Pages Posted: 28 Apr 2020
Date Written: January 31, 2020
This paper studies whether knowledge protection affects firm strategic alliance (SA) activity. Using the staggered adoptions and rejections of the inevitable disclosure doctrine (IDD) by U.S. state courts as exogenous changes in the level of knowledge protection, we document an increase in SA formations for firms headquartered in states that adopt the IDD. We also uncover a positive IDD treatment effect on firms’ long-run alliance-driven abnormal stock returns. The treatment effects are found to be stronger in more knowledge-oriented states, industries and firms. Finally, the increase in SA formations – occasioned by the IDD – subsequently spur local economic and employment growth.
Keywords: Knowledge Protection; Inevitable Disclosure Doctrine; Strategic Alliance; Shareholder Return; Local Economic and Employment Growth
JEL Classification: K11; G14; G30; G38
Suggested Citation: Suggested Citation