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Covenants not to Compete, Labor Mobility, and Industry Dynamics


  • April M. Franco
  • Matthew F. Mitchell


"Conventional wisdom among legal scholars is that contractual restrictions on employee mobility affect turnover and led to the overtaking of Massachusetts' Route 128 by Silicon Valley. We study a model of employee mobility in the spirit of Pakes and Nitzan to see when this can be the case. We show that, in fact, with certain frictions taken into account, a model of employee mobility can not only replicate the overtaking by Silicon Valley, but it can also help to explain Route 128s early dominance. Further, the model explains the relative success of firms that start as, or generate, spin-outs." Copyright (c) 2008, The Author(s) Journal Compilation (c) 2008 Wiley Periodicals, Inc..

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  • April M. Franco & Matthew F. Mitchell, 2008. "Covenants not to Compete, Labor Mobility, and Industry Dynamics," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(3), pages 581-606, September.
  • Handle: RePEc:bla:jemstr:v:17:y:2008:i:3:p:581-606

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    References listed on IDEAS

    1. Arvind Parkhe, 1991. "Interfirm Diversity, Organizational Learning, and Longevity in Global Strategic Alliances," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 22(4), pages 579-601, December.
    2. Steven Brams & Michael Jones & D. Kilgour, 2005. "Forming stable coalitions: The process matters," Public Choice, Springer, vol. 125(1), pages 67-94, July.
    3. Asha Rao & Stuart M Schmidt, 1998. "A Behavioral Perspective on Negotiating International Alliance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(4), pages 665-694, December.
    4. Robert Axelrod & Will Mitchell & Robert E. Thomas & D. Scott Bennett & Erhard Bruderer, 1995. "Coalition Formation in Standard-Setting Alliances," Management Science, INFORMS, vol. 41(9), pages 1493-1508, September.
    5. Daniel J. Seidmann & Eyal Winter, 1998. "A Theory of Gradual Coalition Formation," Review of Economic Studies, Oxford University Press, vol. 65(4), pages 793-815.
    6. Bloch, Francis, 1996. "Sequential Formation of Coalitions in Games with Externalities and Fixed Payoff Division," Games and Economic Behavior, Elsevier, vol. 14(1), pages 90-123, May.
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