Non-competes, Business Dynamism, and Concentration: Evidence from a Florida Case Study

Searle Center Working Paper Series (2017-046)

52 Pages Posted: 25 May 2018 Last revised: 20 Jun 2019

See all articles by Hyo Kang

Hyo Kang

Marshall School of Business, University of Southern California

Lee Fleming

Harvard University - Technology & Operations Management Unit

Date Written: May 29, 2019

Abstract

We investigate the impact of non-compete enforcement on the distribution of firm size and employment growth and business concentration by focusing on Florida’s 1996 legislative change that eased restrictions on the enforcement of non-competes. We first establish the contrast between legal regimes and that wage trends did not change before and after the passage of the legislation. Difference-in-differences models show that following the change, establishments of large firms were more likely to enter Florida; they also created a greater proportion of jobs and increased their share of employment in the state. Entrepreneurs or establishments of small firms, in contrast, were less likely to enter Florida following the law change; they also created a smaller proportion of new jobs and decreased their share of employment. Consistent with these location and job creation dynamics, a variety of business concentration measures increased following the law change in Florida. Border counties in Florida exhibit stronger effects and nationwide cross-sections demonstrate consistent correlations between state-level non-compete enforcement and the employment, size, and concentration dynamics illustrated in Florida.

Keywords: Business Dynamism; Employee Mobility, Entrepreneurship; Firm Sorting; Non-compete Agreement; Business Concentration

JEL Classification: J61, L22, L26, M13, M51

Suggested Citation

Kang, Hyo and Fleming, Lee, Non-competes, Business Dynamism, and Concentration: Evidence from a Florida Case Study (May 29, 2019). Searle Center Working Paper Series (2017-046). Available at SSRN: https://ssrn.com/abstract=3172477 or http://dx.doi.org/10.2139/ssrn.3172477

Hyo Kang (Contact Author)

Marshall School of Business, University of Southern California ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States

HOME PAGE: http://hyokang.com

Lee Fleming

Harvard University - Technology & Operations Management Unit ( email )

Boston, MA 02163
United States
617 495 6613 (Phone)
617 496 5265 (Fax)

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