Trade secret protection and digital innovation: evidence from China’s pilot policy

Using the Trade Secret Protection Innovation Pilot in China as an exogenous shock, this paper examines the effect of trade secret protection on corporate digital technology innovation. Our findings show that stronger trade secret protection effectively enhances firms’ digital technology innovation. Mechanism analysis shows that the pilot boosts digital innovation through increased R&D investment, digital transformation, and improved access to external resources such as bank credit and government subsidies. These effects are stronger in firms with higher trade secret leakage risk, including high-tech firms, private firms, firms with higher employee turnover, weaker internal controls, and greater digital exposure risk.