Proprietary information protection and endogenous technological change: 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.