Proprietary Information Protection
and the Long-Run Implications of Industrial Espionage

This paper deals with proprietary information and industrial espionage. To obtain this goal, an innovation-based growth model is constructed where R&D employment is split into two types of researchers: inventors and spies. The paper provides an analysis of the steady-state effects of better enforcement of proprietary information protection in terms of a change of the institutional set-up devoted to intellectual property rights and private information protection. We find that there is only a temporary positive impact on the innovation rate, while there is permanent negative effect on the steady-state rate of spying and nominal wage. [JEL Classification: D9, K4, L5, O32]

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* Parello@ires.ucl.ac.be

Financial support of the Belgian research programmes "Poles d'Attraction inter-universitaires", PAI P5/21, and the programme "Action de Recherches Concertée", 03/08-302 is gratefully acknowledged. The usual disclaimer applies.