Do non-competition agreements lead firms to pursue risky R&D projects?
Article first published online: 29 JUN 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Strategic Management Journal
Volume 35, Issue 8, pages 1230–1248, August 2014
How to Cite
Conti, R. (2014), Do non-competition agreements lead firms to pursue risky R&D projects?. Strat. Mgmt. J., 35: 1230–1248. doi: 10.1002/smj.2155
- Issue published online: 7 JUL 2014
- Article first published online: 29 JUN 2013
- Accepted manuscript online: 7 JUN 2013 03:57PM EST
- Manuscript Accepted: 24 OCT 2012
- Manuscript Revised: 17 OCT 2012
- Manuscript Received: 16 MAY 2011
- R&D strategy;
- technological breakthroughs;
- non-competition agreements
This study investigates the impact of non-competition agreements on the type of R&D activity undertaken by companies. Non-competition agreements, by reducing outbound mobility and knowledge leakages to competitors, make high-risk R&D projects relatively more valuable than low-risk ones. Thus, they induce companies to choose riskier R&D projects, such that corporate inventions are more likely to lie in the tails of the inventions' value distribution (as breakthroughs or failures) and be in novel technological areas. This study uses data about U.S. patent applications from 1990 to 2000 and considers longitudinal variation in the enforcement of non-compete clauses. The results indicate that in states with stricter enforcement, companies undertake riskier R&D paths than in states that do not enforce non-compete agreements as strictly. Copyright © 2013 John Wiley & Sons, Ltd.