Noncompete Studies Suggest Noncompete Enforcement Improves Training and Quality of Startups

Noncompete and Trade Secret Cases Survey Graph 20150117More and more studies are being conducted about the impact of noncompetes on the economy, including in particular on startups, employee mobility, and innovation.

Two relatively recent studies, suggest some (perhaps) surprising results.

The first, Training the Enemy? Firm-Sponsored Training and the Enforcement of Covenants Not to Compete (January 25, 2015), by University of Illinois professor, Evan Starr, suggests that companies in states that permit stronger enforcement of noncompete agreements tend to provide more training to their employees.

The second, Enforcing Covenants Not to Compete: The Life-Cycle Impact on New Firms (June 15, 2014), by University of Illinois professor, Evan Starr, Whitman School of Management (Syracuse University) professor, Natarajan Balasubramanian, and UCLA Anderson School of Management professor, Mariko Sakakibara, suggests that states that permit stronger enforcement of noncompete agreements tend to have fewer – but better (higher-quality ideas and more likely to survive) – startups.

Tip of the hat to the Washington Post for its story today, The rise of the non-compete agreement, from tech workers to sandwich makers, which included a discussion about a working paper, Noncompetes in the U.S. Labor Force (as of February 18, 2015), from Professor Starr, University of Michigan’s Ross School of Business professor, Norman Bishara, and University of Michigan Law School professor, James J. (“JJ”) Prescott.