Job Hopping in Silicon Valley: Some Evidence Concerning the Micro-Foundations of a High Technology Cluster

29 Pages Posted: 25 May 2006 Last revised: 1 Jan 2023

See all articles by Bruce Fallick

Bruce Fallick

Federal Reserve Bank of Cleveland

Charles A. Fleischman

Board of Governors of the Federal Reserve System

James B. Rebitzer

Boston University School of Management; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2005

Abstract

In Silicon Valley's computer cluster, skilled employees are reported to move rapidly between competing firms. This job-hopping facilitates the reallocation of resources towards firms with superior innovations, but it also creates human capital externalities that reduce incentives to invest in new knowledge. Using a formal model of innovation we identify conditions where the innovation benefits of job-hopping exceed the costs from reduced incentives to invest in human capital. These conditions likely hold for computers, but not in most other settings. Features of state law also favor high rates of inter-firm mobility in California. Outside of California, employers can use non-compete agreements to inhibit mobility, but these agreements are unenforceable in California.Using new data on labor mobility we find higher rates of job-hopping for college-educated men in Silicon Valley's computer industry than in computer clusters located out of the state. Mobility rates in other California computer clusters are similar to Silicon Valley's, suggesting some role for state laws restricting non-compete agreements. Consistent with our model of innovation, we also find that outside of the computer industry, California's mobility rates are no higher than elsewhere.

Suggested Citation

Fallick, Bruce and Fleischman, Charles A. and Rebitzer, James B., Job Hopping in Silicon Valley: Some Evidence Concerning the Micro-Foundations of a High Technology Cluster (October 2005). NBER Working Paper No. w11710, Available at SSRN: https://ssrn.com/abstract=837153

Bruce Fallick (Contact Author)

Federal Reserve Bank of Cleveland ( email )

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Charles A. Fleischman

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James B. Rebitzer

Boston University School of Management ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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