Seminar Series

2021 - 2022

Speaker: Alireza Jay Naghavi (U of Bologna).

Title: “Trade Secrets and Exclusive Contracts in the Automotive Industry”

joint with David Angenendt (TUM) and Giacomo Calzolari (EUI).

Date: Thursday, June 23rdh at 12h30 (Paris Time).

Abstract: In this paper, we study the effect of trade secret protection and product characteristics on the organization of supplier relations, namely on the degree of exclusivity of contracts between automobile manufacturers (OEMs) and auto part suppliers. When an OEM transfers sensitive technology necessary to customize a procured component, a supplier may use the knowledge acquired to serve other rival firms prompting the OEM to use an exclusivity clause on the supplier's side to protect its trade secrets. Under strong trade secret protection, an OEM is less concerned about technology being exposed to competitors due to the possibility of signing a valid non-disclosure agreement. It allows the supplier to safely provide inputs also to other manufacturers to reduce hold-up and create incentives to invest. In countries that lack reliable legal enforcement, the OEM’s only means of protecting sensitive information is by imposing exclusivity to limit the involvement of suppliers with competing OEMs and prevent the exploitation of its trade secrets. The analysis employs a unique dataset of contracts between automotive parts suppliers and manufacturers worldwide obtained from the Marklines "Who Supplies Whom" platform. We find a robust positive association between the strength of trade secrets protection in a supplier country and the number of OEMs it serves. Weak institutions create a trade-off for the OEM between the need to compensate for obliging exclusivity (i.e., account for hold-up) and the protection of its mark-up by preventing its knowledge from leaking to rivals when they share the same supplier. Mapping an index of relationship specificity for each auto part to the component definition provided by Marklines, there impact of trade secrets is particularly strong for products characterized by an intermediate level of relationship specificity susceptible to both hold up and the threat of exposure. The key rationale behind the results is that it is for these inputs that an OEM can reduce hold-up by consenting the supplier to serve other firms when the protection of their trade secrets is guaranteed by law.

Bio: Here is a link to the speaker’s website

http://alirezanaghavi.altervista.org/

You are cordially invited to participate to the seminar, which will take place in Room 104, Bosco building. For those who will not be in the room, please find the zoom link below:

https://tbs-education-fr.zoom.us/j/89678115323?pwd=L013TzBXODVmeGJOZll6di9PSVFoQT09

For more information, please contact: Pierre Mella-Barral p.mella-barral@tbs-education.fr