The Real Effect of Knowledge Protection: Evidence from Strategic Alliances

62 Pages Posted: 28 Apr 2020

See all articles by Iftekhar Hasan

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Ya Liu

The University of Sydney - Discipline of Finance; University of Sydney Business School

Buhui Qiu

University of Sydney Business School; Financial Research Network (FIRN)

Teng Wang

Board of Governors of the Federal Reserve System

Date Written: January 31, 2020

Abstract

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

Hasan, Iftekhar and Liu, Ya and Qiu, Buhui and Wang, Teng, The Real Effect of Knowledge Protection: Evidence from Strategic Alliances (January 31, 2020). Available at SSRN: https://ssrn.com/abstract=3566938 or http://dx.doi.org/10.2139/ssrn.3566938

Iftekhar Hasan

Fordham University ( email )

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Bank of Finland ( email )

P.O. Box 160
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Finland

University of Sydney ( email )

P.O. Box H58
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Australia

Ya Liu (Contact Author)

The University of Sydney - Discipline of Finance ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

University of Sydney Business School ( email )

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Australia

Buhui Qiu

University of Sydney Business School ( email )

Room 513, The Codrington Building
The University of Sydney
Sydney, NSW 2006
Australia
+61 2 9036 6435 (Phone)
+61 2 9351 6461 (Fax)

HOME PAGE: http://sydney.edu.au/business/staff/buhuiq

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Teng Wang

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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