Innovation Motivation: Behavioral Effects of Post-Employment Restrictions

Abstract:     
Traditional economic models view post-employment restrictions as necessary constraints stemming from the assumption that absent such contractual protections, employers would under-invest in R&D and employee training. This article enriches the analysis of human capital investment by developing a dyadic-dynamic investment model, adding both a behavioral dimension of constrained individuals and the aggregate dimension of mobility over time. The article reports original experimental research demonstrating that contractual background affects motivation and performance. The findings reveal that when tasks involve pure effort and are relatively easy to perform, individuals will abandon the tasks at higher rates, spend less time on task, and overwhelmingly more frequently fail to find the correct solution when bound by post-employment restrictions. At the same time, the findings reveal that with tasks that invoke internal talent and creativity rather than pure effort some of these effects, including time on task and quality of performance, largely disappear. Significant gaps in task completion remain even for more creative tasks. The article links recent empirical evidence about positive spillovers with a behavioral analysis that suggests further positive effects, together offering a richer understanding of the costs and benefits of post-employment contractual and regulatory restrictions.  

Number of Pages in PDF File: 46

Keywords: human capital, employment law, contract, non-competes, intellectual property

working papers series