Disclosure disincentivizes new innovations because companies can simply copy competitors rather than invest in new R&D.

3.3.2 Disclosure effects Another channel through which the patent system may foster scientific and technological progress is via disclosure effects. When filing patent applications, inventors are obliged to disclose technical information about their innovations (see e.g. Hall et al., 2014, for a review of the literature on the trade-off between secrecy and disclosure). The empirical evidence on these effects provides generally mixed results.26 In the pharmaceutical sector, the effectiveness of disclosure ought to allow easier technology transfers among firms and universities, as well as a more "ordered" path of search avoiding the costly duplication of efforts (Coriat and Orsenigo, 2014). In our model, information disclosure effects are captured by parameters 훾1 and Ψ (in Eq. 10 and 11) which respectively facilitate the imitation of existing products and the entry in new submarkets after the expiration of patents. We investigate the role of information disclosure under four scenarios, namely low disclosure (훾1 = 0.5, Ψ = 0.5); baseline (훾1 = 1, Ψ = 1); high disclosure (훾1 = 2, Ψ = 2); and a limiting case with "very high disclosure" (훾1 = 50, Ψ = 50). The simulation results are reported in Figure 12 (Monte Carlo averages and standard errors for each experiments are in Table B.4). Substantial effects emerge only in the limit case ("very high disclosure") wherein we observe a reduction in the share of blocked products introduced by incumbents as well as a moderate decrease in average product quality. Quite intuitively, more disclosure shapes the direction of the innovative process towards imitating products with expired patents (i.e. the development of generic drugs), rather than towards quality enhancements. On the one hand, the patterns of search become relatively more "efficient" since firms are discouraged from developing "me too" drugs (i.e. these located in proximity of existing ones) while they are incentivized to copy products only after the expiration of patents. This, in turn, might lead to lower litigation rates and less blocked products. On the other hand, disclosure favours imitation as compared to quality-enhancing innovations within submarkets, thus, resulting in a mild decrease in the average product quality. Nevertheless, neither the number of submarkets discovered nor total product variety appear to be substantially affected by disclosure parameters. Finally, we also run simulations combining together the “strong R&D incentives” and the “very high disclosure” settings in order to build a scenario even more favourable to patents. We did not find any significant difference with the results of the two experiments taken alone.27