Non-Compete Covenants: Incentives to Innovate or Impediments to Growth
AbstractWe find that the enforcement of non-compete clauses significantly impedes entrepreneurship and employment growth. Based on a panel of metropolitan areas in the United States from 1993 to 2002, our results indicate that, relative to states that enforce non-compete covenants, an increase in the local supply of venture capital in states that restrict the scope of these agreements has significantly stronger positive effects on (i) the number of patents, (ii) the number of firm starts, and (iii) employment. We address potential endogeneity issues in the supply of venture capital by using endowment returns as an instrumental variable. Our results point to a strong interaction between financial intermediation and the legal regime in promoting entrepreneurship and economic growth.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 10-02.
Date of creation: 2010
Date of revision:
Contact details of provider:
Web page: http://www.druid.dk/
Other versions of this item:
- Sampsa Samila & Olav Sorenson, 2011. "Noncompete Covenants: Incentives to Innovate or Impediments to Growth," Management Science, INFORMS, vol. 57(3), pages 425-438, March.
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-28 (All new papers)
- NEP-CFN-2010-03-28 (Corporate Finance)
- NEP-ENT-2010-03-28 (Entrepreneurship)
- NEP-FDG-2010-03-28 (Financial Development & Growth)
- NEP-INO-2010-03-28 (Innovation)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Philip Bond & Andrew F. Newman, 2006.
"Prohibitions on Punishments in Private Contracts,"
Boston University - Department of Economics - Working Papers Series
WP2006-060, Boston University - Department of Economics.
- Andrew Newman & Philip Bond, 2004. "Prohibitions on Punishments in Private Contracts," Econometric Society 2004 North American Winter Meetings 143, Econometric Society.
- Matt Marx & Lee Fleming, 2011. "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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keld Laursen).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.