A look at both sides of the coin: Investigating the protective and the disclosure effect of patenting

This paper presents a theoretical and empirical investigation of the two basic effects of patenting: the positive effect of temporarily mitigating competition, and the negative effect of mandatory disclosure of a patent application. Providing empirical evidence for the presented theoretical results we find that (i) a technological lead and the propensity to patent are negatively related as opposed to common intuition, (ii) in industries with imperfect appropriability in case of secrecy the extent of the technological lead is positively associated with the propensity to patent, and that (iii) the intensity of patent protection mitigates the competitive threat a patentee faces.