Trade Secret Laws, Labour Mobility and Innovations

Massimo Motta () and Rønde, Thomas

No 3615, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: 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.

Keywords: Innovation; Intellectual property rights; Labour contracts; Poaching; Relational contracts; Start-ups (search for similar items in EconPapers)
JEL-codes: J30 K20 L14 O31 O34 (search for similar items in EconPapers)
Date: 2002-10
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Citations: View citations in EconPapers (6)

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Working Paper: Trade secret laws, labor mobility, and innovations (2002)
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