In yesterday’s Boston Globe there was an article, Start-ups stifled by noncompetes, which had a wonderful quote (go to the second page):
Luckily, we have an academic here in Massachusetts who has dedicated the past few years to looking at the impact of noncompetes. Matt Marx, who recently joined the faculty of MIT’s Sloan School of Management, has made three important findings about what noncompetes do.
First, he looked at Michigan. During the decades of that state’s greatest economic growth, from 1915 to 1985, noncompete agreements were illegal. In 1985, the law changed – and Marx found that inventors were suddenly less likely to move from one company to another, and specialized inventors were much less likely to move. (I’d observe here that the last 25 years in Michigan have not been a good era to emulate.) Marx has also surveyed inventors in the speech recognition industry around the country and found that about 25 percent of those who were bound by noncompetes often took “occupational detours’’ into other technology sectors reluctantly, to avoid getting sued.
Finally, Marx’s research has found that employees bound by noncompetes tend to take jobs with large companies rather than small start-ups – in part because they believe that a larger company might be able to defend them against a potential lawsuit.
Holy moly! I knew I didn’t like non-competes, but I had no hard data on how a non-compete can work against you in hiring and in innovation.
FYI: Scott Kirsner, the columnist, has a blog, Innovation Economy, and several other articles about non-competes. See Should We Make Non-Compete Agreements Illegal in Masssachusetts? as just one.
If you are a hiring manager, learn about your non-compete agreements and see if they are preventing innovation in your organization or preventing you from hiring the people you want.
My non-US readers: are there non-competes where you work? Are they enforced?