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Trade secret laws, labor mobility, and innovations

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Author Info

  • 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.

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File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/6800
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Bibliographic Info

Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 08-2002.

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Length: 34 pages
Date of creation: 01 Sep 2002
Date of revision:
Handle: RePEc:hhs:cbsnow:2002_008

Contact details of provider:
Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Phone: 38 15 25 75
Fax: 38 15 34 99
Email:
Web page: http://www.cbs.dk/departments/econ/
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Related research

Keywords: Innovation; intellectual property rights; labor contracts; poaching; relational contracts; start-ups;

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References

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  10. Fosfuri, Andrea & Motta, Massimo & Ronde, Thomas, 2001. "Foreign direct investment and spillovers through workers' mobility," Journal of International Economics, Elsevier, vol. 53(1), pages 205-222, February.
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  12. Aghion, P. & Tirole, J., 1993. "On the Management of Innovation," Working papers 93-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts And The Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 39-84, February.
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Citations

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Cited by:
  1. Fosfuri, Andrea & Rønde, Thomas, 2003. "High-Tech Clusters, Technology Spillovers and Trade Secret Laws," CEPR Discussion Papers 4130, C.E.P.R. Discussion Papers.
  2. Fosfuri, Andrea & Rønde, Thomas, 2002. "High-tech clusters, technology spillovers, and trade secret laws," Working Papers 07-2002, Copenhagen Business School, Department of Economics.
  3. Chrysovalantou Milliou, 2006. "Endogenous Protection Of R&D Investments," Economics Working Papers we066325, Universidad Carlos III, Departamento de Economía.
  4. 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.
  5. 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.

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