job hopping hypothesis - 07-042 Noncompetes and Inventor...

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07-042 Copyright © 2007 by Matt Marx, Deborah Strumsky, and Lee Fleming Working papers are in draft form. This working paper is distributed for purposes of comment and discussion only. It may not be reproduced without permission of the copyright holder. Copies of working papers are available from the author. Noncompetes and Inventor Mobility: Specialists, Stars, and the Michigan Experiment Matt Marx Deborah Strumsky Lee Fleming
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1 Noncompetes and Inventor Mobility: Specialists, Stars, and the Michigan Experiment Matt Marx Rock Center 107 Harvard Business School Boston, Ma. 02163 (617) 969-9693 mmarx@hbs.edu Deborah Strumsky Baker Library 280 Harvard Business School Boston, Ma. 02163 (617) 384-5067 dstrumsky@hbs.edu Lee Fleming Morgan Hall 485 Harvard Business School Boston, Ma. 02163 (617) 495-6613 lfleming@hbs.edu January 17, 2007 Many thanks to Adam Juda and Ivin Baker for their database development and the Harvard Business School Department of Research for supporting our research. Harlan Piper performed excellent research assistance, and the work benefited greatly from feedback from Bill Barnett, Josh Lerner, Jose Lobo, Peter Thompson, as well as presentations at the NBER, INFORMS, Stanford, and Harvard Universities. Errors and omissions remain ours.
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2 Abstract: Several scholars have documented the positive consequences of job-hopping by inventors, including knowledge spillovers and agglomeration and the concentration of spinoffs. This work investigates a possible antecedent of inventor mobility: regional variation in the enforcement of post- employment noncompete covenants. While previous research on non-competes has been largely focused on California and Silicon Valley, we exploit Michigan's inadvertent reversal of its noncompete enforcement legislation as a natural experiment to investigate the impact of noncompetes on mobility. Using the U.S. patent database and a differences-in-differences approach between inventors in states that did not enforce and did not change enforcement of non-compete laws, we find that relative mobility decreased by 34% in Michigan after the state reversed its policies. Moreover, this effect was amplified 14% for “star” inventors and 17% for “specialist” inventors.
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3 Introduction The loss of key employees to a competitor can be devastating, especially for high-technology companies whose “most valuable assets walk out the door every night.” In 2005, for example, Microsoft engaged in a public legal battle for several months to prevent Google from hiring away Kai-Fu Lee, its vice president responsible for search technology, who had signed an agreement not to compete against Microsoft for one year after leaving the company. Given the specialized investments required to hire and train technical personnel, it is perhaps no surprise that managers have a love/hate relationship with the movement of workers from one company to the other—depending on whether they are gaining or losing talent.
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This note was uploaded on 09/16/2010 for the course MANAGERIAL bacc100 taught by Professor Adnan during the Spring '10 term at Abraham Baldwin Agricultural College.

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job hopping hypothesis - 07-042 Noncompetes and Inventor...

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