Speech Is Silver, but Silence Is Golden: Information Supression and the Promotion of Innovation

Innovation is difficult to finance as mere disclosure reduces its value. We study intellectual property licenses mandatorily disclosed by US public firms. Firms may temporarily redact information from these filings, offering a counterfactual to full-disclosure. Firms with valuable IP in competitive markets redact more often. Despite increased information asymmetry, investors react positively, inferring redaction signals IP worth hiding. Redactors experience better reactions when concealing tacit knowledge and worse reactions when IP is less protected (natural experiment) or redaction is less credible (repeated redaction, high competition). Our findings show credible non-disclosure partially resolves information frictions for innovative firms in public markets.