Premium
The Value of Employee Retention: Evidence From a Natural Experiment
Author(s) -
Younge Kenneth A.,
Marx Matt
Publication year - 2015
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/jems.12154
Subject(s) - enforcement , natural experiment , offset (computer science) , competition (biology) , value (mathematics) , business , industrial organization , labour economics , economics , statistics , mathematics , computer science , law , biology , political science , ecology , programming language
We estimate the firm‐level returns to retaining employees using difference‐in‐differences analysis and a natural experiment where the enforcement of employee noncompete agreements was inadvertently reversed in Michigan. We find that noncompete enforcement boosted the short‐term value of publicly traded companies by approximately 9%. The effect is increasing in local competition and growth opportunities, and offset by patenting.