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Trade secret laws, labor mobility, and innovations

Author

Listed:
  • Motta, Massimo

    (European University Institute, Florence)

  • Rønde, Thomas

    (University of Mannheim)

Abstract

We show that when the researcher’s (observable but not contractible) contribution to innovation is crucial, a covenant not to compete (CNC) reduces e.ort and profits under both spot and relational contracts. Having no CNC allows the researcher to leave for a rival. This alleviates a commitment problem by forcing the firm to reward a successful researcher. However, if the firm’s R&D investment mainly matters, including a CNC in the contract is optimal, as it ensures the firm’s incentives to invest.

Suggested Citation

  • Motta, Massimo & Rønde, Thomas, 2002. "Trade secret laws, labor mobility, and innovations," Working Papers 08-2002, Copenhagen Business School, Department of Economics.
    • Handle: RePEc:hhs:cbsnow:2002_008
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    Cited by:

    1. Fosfuri, Andrea & Rønde, Thomas, 2002. "High-tech clusters, technology spillovers, and trade secret laws," Working Papers 07-2002, Copenhagen Business School, Department of Economics.
    2. Rauch, James E., 2016. "Dynastic entrepreneurship, entry, and non-compete enforcement," European Economic Review, Elsevier, vol. 86(C), pages 188-201.
    3. Fosfuri, Andrea & Rønde, Thomas, 2003. "High-Tech Clusters, Technology Spillovers and Trade Secret Laws," CEPR Discussion Papers 4130, C.E.P.R. Discussion Papers.
    4. Matt Marx & Lee Fleming, 2012. "Non-compete Agreements: Barriers to Entry…and Exit?," NBER Chapters, in: Innovation Policy and the Economy, Volume 12, pages 39-64, National Bureau of Economic Research, Inc.
    5. Kameshwari Shankar & Suman Ghosh, 2005. "Favorable Selection in the Labor Market: A Theory of Worker Mobility in R&D Intensive Industries," Working Papers 05006, Department of Economics, College of Business, Florida Atlantic University.
    6. Matt Marx & Deborah Strumsky & Lee Fleming, 2009. "Mobility, Skills, and the Michigan Non-Compete Experiment," Management Science, INFORMS, vol. 55(6), pages 875-889, June.
    7. Milliou, Chrysovalantou, 2006. "Endogenous protection of R and D investments," UC3M Working papers. Economics we066325, Universidad Carlos III de Madrid. Departamento de Economía.
    8. Anand, Smriti & Hasan, Iftekhar & Sharma, Priyanka & Wang, Haizhi, 2017. "Enforceability of non-complete agreements: When does state stifle productivity?," Bank of Finland Research Discussion Papers 24/2017, Bank of Finland.
    9. Anand, Smriti & Hasan, Iftekhar & Sharma, Priyanka & Wang, Haizhi, 2017. "Enforceability of non-complete agreements : When does state stifle productivity?," Research Discussion Papers 24/2017, Bank of Finland.
    10. Fosfuri, Andrea & Ronde, Thomas, 2004. "High-tech clusters, technology spillovers, and trade secret laws," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 45-65, January.
    11. repec:zbw:bofrdp:2017_024 is not listed on IDEAS

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    More about this item

    Keywords

    Innovation; intellectual property rights; labor contracts; poaching; relational contracts; start-ups;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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