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Title: Non-compete clauses, employee effort and spin-off entrepreneurship: A laboratory experiment
Authors: Buenstorf, G
Engel, C
Fischer, S
Gueth, W
Keywords: Non-compete clause;Effort;Spin-off entrepreneurship;Reciprocity;Fairness
Issue Date: 2018
Publisher: Elsevier
Citation: Research Policy, 2016, 45 (10), pp. 2113 - 2124
Abstract: We experimentally test the effect of enforceable non-compete clauses on working effort and spin-off entrepreneurship. An employee invests effort in the probability of a profitable innovation. After a successful innovation the employee may want to start her own spin-off firm and compete with her prior employer. In the baseline setup without non-compete clause, spin-offs result from failed negotiation about employee compensation even though they reduce the joint payoffs of both parties. In two treatments with non-compete clause the employer can prevent successful innovators from leaving the firm. We find no significantly negative effect of non-compete clauses on employee effort, even if compensation is low.
ISSN: 0048-7333
Appears in Collections:Dept of Economics and Finance Research Papers

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