Trade Secret Laws, Labor Mobility and Innovations

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Trade Secret Laws, Labor Mobility and Innovations

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Titel: Trade Secret Laws, Labor Mobility and Innovations
Forfatter: Motta, Massimo; Rønde, Thomas
Resume: We show that when the researcher’s (observable but not contractible) contribution to innovation is crucial, a covenant not to compete (CNC) reduces effort 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. JEL Codes: J3, K2, L14, O31, O34. Keywords: Innovation, intellectual property rights, labor contracts, poaching, relational contracts, start-ups.
URI: http://hdl.handle.net/10398/6800
Dato: 2004-06-15

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