Trade Secrets and Information Sharing

If trade secrets are weakly protected by law, firms risk losing their valuable information when employees are hired by competitors. It may therefore be optimal to limit the number of employees who share the trade secrets even if it reduces the firm's productive efficiency. The benefits of limited information sharing are greatest if the efficiency cost is low and the competition in the market is neither very tough nor very weak. It is shown that it is more profitable to reduce the information sharing by giving the employees different information than by giving some employees more information than others.