Michael Klein | Patents, Secrecy, and Financing Innovation
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Eggers Hall, Syracuse, NY 13244
https://www.maxwell.syr.edu/events/2025/11/17/default-calendar/TDPE-Klein-Nov17
The Moynihan Institute’s program for Trade, Development and Political Economy welcomes Michael A. Klein, Ph.D. from Rensselaer Polytechnic Institute.
Paper Abstract: This paper examines the relationship between financial development and the economic impact of patent policy. We present country-level empirical evidence that patent protection is more likely to stimulate economic growth at low levels of financial development.
We explore the micro-foundations of this result in a large sample of Chinese firms. We find that financially constrained firms exhibit a strong preference for patents over trade secrets, while firms concerned about competitor imitation favor secrecy.
To interpret these patterns, we develop a general equilibrium growth model featuring innovative firms that endogenously choose between patents and secrecy. This choice depends on innovation size, the relative effectiveness of secrecy in deterring imitation, and the ability of patents to lower borrowing costs by mitigating financial frictions.
We demonstrate that greater financial development decreases the cost-reduction effect of patenting, incentivizes more firms to choose secrecy, and reduces the economic benefits from strengthening patent protection.
Paper Authors:
Michael A. Klein, Rensselaer Polytechnic Institute
kleinm5@rpi.edu
yibaiyang@um.edu.mo
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