Employment Restrictions on Resource Transferability and Value Appropriation from Employees

Abstract

We use a question-driven approach to examine the joint adoption of four employment restrictions that limit firm resource outflows—nondisclosure, nonsolicitation, nonrecruitment, and noncompete agreements—and their association with value appropriation from employees. Using novel individual- and firm-level survey data, we find that when firms adopt one restriction, they tend to adopt either all four restrictions or only a nondisclosure agreement. Access to valuable resources, state noncompete laws and the inevitable disclosure doctrine relate to adoption, but in unexpected ways, and leave much variation unexplained. Employees with all four restrictions earn 5.4% less than employees with only nondisclosures, with this effect being driven by workers with low-bargaining power. Isolated analyses of earnings and a single restriction (e.g., only noncompetes) yields different results from those that consider joint adoption, likely because of selection.

Keywords: Employment Restrictions, Value Appropriation, Resource Protection

JEL Classification: J31, J41, J42, K31