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.
- Ejsing, Ann-Kathrine & Kaiser, Ulrich & Kongsted, Hans Christian & Laursen, Keld, 2013.
"The Role of University Scientist Mobility for Industrial Innovation,"
IZA Discussion Papers
7470, Institute for the Study of Labor (IZA).
- Ann-Kathrine Ejsing & Ulrich Kaiser & Hans Christian Kongsted & Keld Laursen, 2013. " The Role of University Scientist Mobility for Industrial Innovation," Working Papers 336, University of Zurich, Department of Business Administration (IBW).
- Guido Bünstorf & Christoph Engel & Sven Fischer & Werner Güth, 2013.
"Win Shift Lose Stay - An Experimental Test of Non-Compete Clauses,"
Jena Economic Research Papers
2013-038, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
- Guido Bünstorf & Christoph Engel & Sven Fischer & Werner Güth, 2013. "Win Shift Lose Stay - An Experimental Test of Non-Compete Clauses," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2013_17, Max Planck Institute for Research on Collective Goods.
- Bond, Philip & Newman, Andrew F., 2009.
"Prohibitions on punishments in private contracts,"
Journal of Financial Intermediation,
Elsevier, vol. 18(4), pages 526-540, October.
- Andrew Newman & Philip Bond, 2004. "Prohibitions on Punishments in Private Contracts," Econometric Society 2004 North American Winter Meetings 143, Econometric Society.
- 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.
- Bozkaya, Ant & Kerr, William R., 2013. "Labor regulations and European venture capital," Research Discussion Papers 30/2013, Bank of Finland.
- Ulrich Kaiser & Hans Christian Kongsted & Thomas Ronde, 2013. " Does the Mobility of R & D Labor Increase Innovation?," Working Papers 336, University of Zurich, Department of Business Administration (IBW).
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Keld Laursen).
If references are entirely missing, you can add them using this form.