Trade Secrets Laws and Inventory Efficiency: Empirical Evidence from U.S. Manufacturing

Abstract

Here, we investigate the impact of differences over time and across states in the law of trade secrets on the efficiency of production in manufacturing, as represented by inventories. We find that stronger trade secrets protection was associated with lower inventories: a one standard deviation increase in the index of trade secrets law was associated with inventories being 1.6% lower. Consistent with economies of scale in inventories, the effect of trade secrets protection was increasing in company size, as measured by sales.

Keywords: trade secrets, inventory, operation efficiency

JEL Classification: O32, O34