Trade secret laws, labor mobility, and innovations

Massimo Motta () and Thomas Rønde
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Thomas Rønde: University of Mannheim, Postal: University of Mannheim, Copenhagen Business School, and C.E.P.R., London

No 08-2002, Working Papers from Copenhagen Business School, Department of Economics

Abstract: We show that when the researcher’s (observable but not contractible) contribution

to innovation is crucial, a covenant not to compete (CNC) reduces e.ort 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; labor 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)
Pages: 34 pages
Date: 2002-09-01
New Economics Papers: this item is included in nep-dev and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Trade Secret Laws, Labour Mobility and Innovations (2002)
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