Journal article
Non-compete clauses, employee effort and spin-off entrepreneurship: A laboratory experiment
Publication Details
Authors: | Bünstorf, G.; Engel, C.; Fischer, S.; Güth, W. |
Publisher: | ELSEVIER SCIENCE BV |
Publication year: | 2016 |
Journal: | Research Policy: Policy, management and economic studies of science, technology and innovation |
Pages range : | 2113-2124 |
Volume number: | 45 |
Start page: | 2113 |
End page: | 2124 |
Number of pages: | 12 |
ISSN: | 0048-7333 |
DOI-Link der Erstveröffentlichung: |
Abstract
We experimentally test the effect of enforceable non-compete clauses on working effort and spin-off entrepreneurship. An employee invests effort in the probability of a profitable innovation. After a successful innovation the employee may want to start her own spin-off firm and compete with her prior employer. In the baseline setup without non-compete clause, spin-offs result from failed negotiation about employee compensation even though they reduce the joint payoffs of both parties. In two treatments with non-compete clause the employer can prevent successful innovators from leaving the firm. We find no significantly negative effect of non-compete clauses on employee effort, even if compensation is low. (C) 2016 Elsevier B.V. All rights reserved.
We experimentally test the effect of enforceable non-compete clauses on working effort and spin-off entrepreneurship. An employee invests effort in the probability of a profitable innovation. After a successful innovation the employee may want to start her own spin-off firm and compete with her prior employer. In the baseline setup without non-compete clause, spin-offs result from failed negotiation about employee compensation even though they reduce the joint payoffs of both parties. In two treatments with non-compete clause the employer can prevent successful innovators from leaving the firm. We find no significantly negative effect of non-compete clauses on employee effort, even if compensation is low. (C) 2016 Elsevier B.V. All rights reserved.
Keywords
Effort, Non-compete clause, Reciprocity Fairness, Spin-off entrepreneurship
