We thank participants at the 2003 Society for Economic Dynamics Summer Meetings, the 2004 Olin CRES IO Conference, 2005 Midwest Macroeconomics Summer meetings, 2006 International Industrial Organization Conference, 2006 RICAFE2, and seminar participants at the Iowa Macro Lunch, Philadelphia Federal Reserve Bank, Olin School of Business/Washington University, the Richard Ivey School of Business/University of Western Ontario, and the University of Toronto-Scarborough, as well as two referees and a coeditor for helpful comments.
Covenants not to Compete, Labor Mobility, and Industry Dynamics
Article first published online: 14 AUG 2008
© 2008, The Author(s) Journal Compilation © 2008 Wiley Periodicals, Inc.
Journal of Economics & Management Strategy
Volume 17, Issue 3, pages 581–606, Fall 2008
How to Cite
Franco, A. M. and Mitchell, M. F. (2008), Covenants not to Compete, Labor Mobility, and Industry Dynamics. Journal of Economics & Management Strategy, 17: 581–606. doi: 10.1111/j.1530-9134.2008.00187.x
- Issue published online: 14 AUG 2008
- Article first published online: 14 AUG 2008
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.