Enforceability of noncompetition agreements and firm innovation: does state regulation matter?

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Title: Enforceability of noncompetition agreements and firm innovation: does state regulation matter?
Author: Yin, Desheng ; Hasan, Iftekhar ; Kobeissi, Nada ; Wang, Haizhi
Series: Innovation: Organization & Management
Series volume: 19
Series number: 2
Year of publication: 2017
Publication date: 16.1.2017
Pages: 270-286
Keywords: yritykset; innovaatiot; sääntely; human capital; patentit; USA
Other keywords: Noncompetition agreements; innovation; industry labor mobility; long-term oriented compensation; state regulation; mobility of human capital
Abstract: In this study, we examine how noncompetition agreements and the mobility of human capital – a core asset of any firm – affect innovations of publicly traded firms in the United States. We find that firms in states with stricter noncompetition enforcement have fewer patent applications. We also examine patent forward citations and find that tougher enforcement of such contracts is associated with less innovative patents. Notably, we find that stronger enforcement of noncompetition agreements impedes innovation for firms facing intense industry labor mobility. High-powered, equity-based compensation positively moderates the relationship between noncompetition enforcement and innovation, but only for the quality of innovation.


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