Bundling Employment Restrictions and Value Appropriation from Employees

68 Pages Posted: 8 Apr 2021 Last revised: 18 Apr 2022

See all articles by Natarajan Balasubramanian

Natarajan Balasubramanian

Syracuse University - Whitman School of Management

Evan Starr

University of Maryland Robert H Smith School of Business

Shotaro Yamaguchi

University of Maryland - Department of Management & Organization

Date Written: April 14, 2021

Abstract

We examine how firms bundle multiple postemployment restrictions and how such bundling is associated with value appropriation between firms and their employees. Using novel employee- and firm-level survey data on nondisclosure, nonsolicitation, nonrecruitment, and noncompete agreements, we theorize and show that when firms adopt any restrictions, they tend to adopt only a nondisclosure agreement or all four restrictions. Consistent with bundling enabling value appropriation by firms, employees bound by all four restrictions earn 5.4% less than employees with only nondisclosure agreements. In contrast, the same comparison shows that top managers have relatively higher earnings, consistent with their higher bargaining power. Finally, we show that examining one restriction alone (e.g., only nononcompetes) yields different results from analyses that consider bundling, likely because of selection concerns.

Keywords: Employment Restrictions, Value Appropriability, Value Protection, Bundling

JEL Classification: J31, J41, J42, K31

Suggested Citation

Balasubramanian, Natarajan and Starr, Evan and Yamaguchi, Shotaro, Bundling Employment Restrictions and Value Appropriation from Employees (April 14, 2021). Available at SSRN: https://ssrn.com/abstract=3814403 or http://dx.doi.org/10.2139/ssrn.3814403

Natarajan Balasubramanian

Syracuse University - Whitman School of Management ( email )

United States

Evan Starr (Contact Author)

University of Maryland Robert H Smith School of Business ( email )

United States
(301) 405-2320 (Phone)

Shotaro Yamaguchi

University of Maryland - Department of Management & Organization ( email )

United States

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