Win shift lose stay: An experimental test of non-compete clauses

Arbeitspapier

We experimentally test the effect of enforceable non-compete clauses on working efforts. The employee can invest into the probability of making a profitable innovation. After a successful innovation (Win) the employee may want to leave the firm (Shift) whereas after an innovation failure (Lose) he may remain (Stay) . In the treatments with non-compete clause, but not in the baseline, the employer can prevent successful innovators from leaving the firm. With standard preferences, effort should be lower if the worker cannot leave the firm, except if compulsory compensation for having to stay is very high. By contrast we find no reduction in effort even if compensation is low. Employers anticipate the incentive problem and pay a higher wage which employees reciprocate by higher effort.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Preprints of the Max Planck Institute for Research on Collective Goods ; No. 2013/17

Classification and Topics

• Classification: Wirtschaft ; Economics of Regulation ; Firm Behavior: Theory ; Compensation Packages; Payment Methods ; Wages, Compensation, and Labor Costs: Public Policy
• Subject: reciprocity ; fairness ; labor relations ; non compete clause ; non compete covenant

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bünstorf, Guido ; Engel, Christoph ; Fischer, Sven ; Güth, Werner
• Event: Veröffentlichung
• (who): Max Planck Institute for Research on Collective Goods
• (where): Bonn
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/84979
• Last update: 10.03.2025, 11:42 AM CET