Knowledge Protection and Strategic Alliances
Abstract:
This paper investigates the impact of proprietary knowledge protection on firms’ strategic alliance formations, leveraging U.S. state courts' staggered adoption and rejection of the inevitable disclosure doctrine (IDD) as a natural experiment. Applying generalized difference-in-differences (DiD) and Callaway and Sant’Anna (2021) DiD estimators, we uncover a significant increase in alliance activity following IDD recognition, particularly in knowledge-intensive industries and among firms with high levels of proprietary knowledge. Notably, the increased knowledge of employee outflow typically seen after alliance formation is effectively curbed by the enhanced protection following IDD adoptions, directly highlighting the IDD’s critical role in protecting proprietary knowledge and alleviating concerns about its unintended leakage through employee mobility. In addition, we find no evidence that firms increasingly use alliances as an alternative to exchange technology after the IDD restricts employee mobility. Our study provides novel insight into the role of knowledge protection in promoting alliance activities.
Bio:
Dr. Daisy Liu joined the University of Sydney Business School as an Associate Lecturer in 2023. She obtained her PhD from the University of Sydney, with research interests spanning corporate finance, financial regulation, and banking. Her work has been published in renowned journals such as the Journal of Financial Stability, and she has received several research awards, including the Spencer Martin Best Paper Award at the National PhD Consortium (FIRN) in Australia. Daisy’s ongoing research is under review with SMJ and JFQA.
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