题　目：Leave with Consequences? Organizational and Contextual Drivers of Noncompete Enforcement

嘉　宾：Haifeng Wang, Ph.D. candidate, University of Wisconsin-Madison

主持人：谢露群  副教授  上海交通大学安泰经济与管理学院

时　间：2023年09月20日（周三） 09:30-11:00

地　点：腾讯会议

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内容简介:

This paper delves into labor market frictions, with a specific emphasis on noncompete agreements (NCAs) that restrict employees' mobility. NCAs hold substantial importance for academic research, managerial implications, and policy formulation. Previous research has demonstrated that NCAs effectively manage human capital by reducing employee turnover, changing R&D preferences, confidential information sharing, etc. However, the majority of these studies have primarily centered on the inclusion of NCA clauses in employment contracts and its effects while ignoring what happens afterward between firms and employees after the NCA signing, such as the actual enforcement of NCAs and litigations if departing employees violate NCA clauses. It is reasonable to anticipate that if firms merely have employees sign NCAs without actively enforcing these safeguards or taking legal action against those who violate contractual obligations, the effectiveness of NCAs will diminish over time. Employees may come to view these clauses as mere formalities within employment contracts. Therefore, focusing only on NCAs signing, the extant literature leaves many questions on NCAs unanswered: to what extent does the firm enforce NCAs, whether the firm will litigate against employees who violate the rules of NCAs by joining competitors or starting competing ventures, and how the current and future employees of the focal firm will react to these NCAs enforcements and litigations, whether a reputation of NCAs enforcement toughness is economically beneficial for the focal firm and whether such a formidable reputation shows spillover effects on firms in the same industry or the same regional area? Additionally, prior studies have primarily examined knowledge spillovers via employee mobility, neglecting the transfer of business relationships when employees take away clients. Measures designed for protecting knowledge might not necessarily apply to safeguarding business relationships. Furthermore, the existing literature mostly revolves around NCA use at the U.S. state level, often overlooking industry and firm heterogeneity, in part due to data limitations. Within the same state, industries and firms show significant variations in their propensity to adopt and enforce NCAs based on their resource endowments, institutional environment, market position, reliance on human capital, etc. My dissertation endeavors to address these gaps using manually gathered firm-level data on NCA enforcement.

This section explores the contextual and organizational factors that propel firm-level NCA enforcement. These factors encompass state-level enforceability, industry structure, industry types of knowledge-intensive vs. service-intensive, and firm-specific characteristics such as employment types. Empirically, I collected lawsuit records from Bloomberg Law databases and complemented them with other sources such as PACER and Nexis Uni. Using text analysis of these lawsuit records, I could identify cases where the focal firm sued former employees due to the breach of noncompete clauses. Results show that the state NCA enforceability has an inverted-U relationship with firm likelihood of NCA litigations, suggesting a general positive correlation between firm NCA enforcement and state enforceability. However, states with exceedingly robust enforceability witness fewer litigations due to clear employee expectations and reduced violations. At the industry level, this study finds that industry leaders in competitive markets are more prone to initiating NCA lawsuits to shield valuable knowledge. Distinct patterns emerge between industries driven by varying competitive factors: firms in relationship-reliant industries, such as insurance and consulting that depend on client lists and customer service for competitive advantage, are not among the highest to use NCAs but are much more likely to litigate defecting employees. However, firms in intellectual property-reliant industries such as information and technology that rely more on knowledge would use the NCAs heavily but do not litigate much. The NCAs differentially protect the transfer of knowledge vs. business relationship incurred by employee mobility. I attribute these results to the presence of legal uncertainty about whether the NCA binds due to the close relationship between the agent and the customer, and to the existence of alternative protective measures such as patents, trade secrets, inevitable disclosure doctrine, etc. At the firm level, the study scrutinizes insurance companies and reveals that firms employing independent agents are more inclined to litigate due to legal ambiguities.

演讲人简介：

I'm Haifeng Wang, a Ph.D. candidate in the Department of Management and Human Resources at the Wisconsin School of Business, University of Wisconsin-Madison. My research focuses on employee mobility, knowledge spillover, and employee entrepreneurship, particularly the labor market frictions that impact human resource-based competitive advantage. My dissertation examines the factors influencing firms' noncompete agreements (NCAs) enforcement and the subsequent outcomes, including the organizational and contextual drivers of NCA enforcement and the effects of NCA enforcement on employee mobility, productivity, and spinouts. I'm also conducting another entrepreneurship project that explores how early employment organizational context influences employees' human capital accumulation and entrepreneurial transition.

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