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

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References

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  13. Burguet, Roberto & Caminal, Ramón & Matutes, Carmen, 1999. "Golden Cages for Showy Birds: Optimal Switching Costs in Labour Markets," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2070, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Fosfuri, Andrea & Ronde, Thomas, 2004. "High-tech clusters, technology spillovers, and trade secret laws," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 22(1), pages 45-65, January.
  2. Fosfuri, Andrea & Rønde, Thomas, 2002. "High-tech clusters, technology spillovers, and trade secret laws," Working Papers, Copenhagen Business School, Department of Economics 07-2002, Copenhagen Business School, Department of Economics.
  3. Kameshwari Shankar & Suman Ghosh, 2005. "Favorable Selection in the Labor Market: A Theory of Worker Mobility in R&D Intensive Industries," Working Papers, Department of Economics, College of Business, Florida Atlantic University 05006, Department of Economics, College of Business, Florida Atlantic University.
  4. Fosfuri, Andrea & Rønde, Thomas, 2003. "High-Tech Clusters, Technology Spillovers and Trade Secret Laws," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4130, C.E.P.R. Discussion Papers.
  5. Chrysovalantou Milliou, 2009. "Endogenous protection of R&D investments," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 184-205, February.

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