IIE Research Seminar Series - Surprisingly Small: The Effect of Trade Secret Breaches on Firm Performance

You can read the short blog about the paper here.

Abstract

Trade secrets are growing in economic importance but are increasingly the target of theft and cybercrime. As important strategic assets for firms, the loss of trade secrets should negatively impact the firm. Using an event study for the entire population of publicly listed firms who are named victims in criminal proceedings for trade secrets under U.S. federal law, this paper introduces a new data set to examine the stock market impact of the announcement of a loss of trade secrecy. The study finds there is no statistically significant abnormal return to the announcement overall. However, crimes that are more severe or in industries where knowledge flows are greater do result in significant negative returns. Thus, our results suggest that the benefits of the protection of trade secrets may be overstated and that trade secret theft may not be a severe threat to country’s economy and innovation.

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