Employment Restrictions on Resource Transferability and Value Appropriation from Employees

61 Pages Posted: 8 Apr 2021 Last revised: 1 Feb 2023

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: January 31, 2023

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

Suggested Citation

Balasubramanian, Natarajan and Starr, Evan and Yamaguchi, Shotaro, Employment Restrictions on Resource Transferability and Value Appropriation from Employees (January 31, 2023). 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 )

Shotaro Yamaguchi

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

United States

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