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Do non‐competition agreements lead firms to pursue risky R&D projects?
Author(s) -
Conti Raffaele
Publication year - 2014
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.2155
Subject(s) - competitor analysis , competition (biology) , enforcement , business , industrial organization , distribution (mathematics) , value (mathematics) , lead (geology) , marketing , law , computer science , political science , ecology , mathematical analysis , mathematics , machine learning , biology , geomorphology , geology
This study investigates the impact of non‐competition agreements on the type of R&D activity undertaken by companies. Non‐competition agreements, by reducing outbound mobility and knowledge leakages to competitors, make high‐risk R&D projects relatively more valuable than low‐risk ones. Thus, they induce companies to choose riskier R&D projects, such that corporate inventions are more likely to lie in the tails of the inventions' value distribution (as breakthroughs or failures) and be in novel technological areas. This study uses data about U.S. patent applications from 1990 to 2000 and considers longitudinal variation in the enforcement of non‐compete clauses. The results indicate that in states with stricter enforcement, companies undertake riskier R&D paths than in states that do not enforce non‐compete agreements as strictly . Copyright © 2013 John Wiley & Sons, Ltd.