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Stanford Study Credits Lack of Non-Competes For Silicon Valley's Success
HughPickens.com writes Natalie Kitroeff writes at Bloomberg that a new study says the secret to Silicon Valley's triumph as the global capital of innovation may lie in a quirk of California's employment law that prohibits the legal enforcement of non-compete clauses. Unlike most states, California prohibits enforcement of non-compete clauses that force people who leave jobs to wait for a predetermined period before taking positions at rival companies. That puts California in the ideal position to rob other regions of their most prized inventors, "Policymakers who sanction the use of non-competes could be inadvertently creating regional disadvantage as far as retention of knowledge workers is concerned," wrote the authors of the study "Regional disadvantage? Employee non-compete agreements and brain drain" (PDF). "Regions
that choose to enforce employee non-compete agreements may therefore be subjecting
themselves to a domestic brain drain not unlike that described in the literature on international emigration out of less developed countries."
The study, which looked at the behavior of people who had registered at least two patents from 1975 to 2005, focused on Michigan, which in 1985 reversed its longstanding prohibition of non-compete agreements. The authors found that after Michigan changed the rules, the rate of emigration among inventors was twice as a high as it was in states where non-competes remained illegal. Even worse for Michigan, its most talented inventors were also the most likely to flee. "Firms are going to be willing to relocate someone who is really good, as opposed to someone who is average," says Lee Fleming. For the inventors, it makes sense to take a risk on a place such as California, where they have more freedom. "If the job they relocate for doesn't work out, then they can walk across the street because there are no non-competes."
The study, which looked at the behavior of people who had registered at least two patents from 1975 to 2005, focused on Michigan, which in 1985 reversed its longstanding prohibition of non-compete agreements. The authors found that after Michigan changed the rules, the rate of emigration among inventors was twice as a high as it was in states where non-competes remained illegal. Even worse for Michigan, its most talented inventors were also the most likely to flee. "Firms are going to be willing to relocate someone who is really good, as opposed to someone who is average," says Lee Fleming. For the inventors, it makes sense to take a risk on a place such as California, where they have more freedom. "If the job they relocate for doesn't work out, then they can walk across the street because there are no non-competes."
And then there's those Steve Jobs emails that revealed major players in Silicon Valley created their own de facto non-compete policies with each other. The study is incomplete without examining intra-California career stifling.
"Love heals scars love left." -- Henry Rollins
I can't provide any substantial comments on this article for another 4 months.
Great. Then you don't mind if I take a hit out on your life? I mean, its just a contract, the fact its to kill someone doesn't outweigh my liberty to enter into it, does it?
Congratulations, you've just said the stupidest thing I've ever read on the internet. That includes "Where does babby come from".
I still have more fans than freaks. WTF is wrong with you people?
There is no freedom when the contract is de-facto mandatory for employment.
I have refused to sign any contract with a non-compete in it for IT work starting with my first IT job in 2005. I think I saw something on slashdot back then making me weary of them.
My first company was getting everyone to sign them after sales people were leaving and taking clients, but I just refused and they never asked. With every other company, if I saw it in the contract, I'd tell them "I don't sign non-competes." They would always take it out or give me a new contract. Only one company made a big deal about it, a start up, and it wasn't even the company but their horrible lawyer. The principal investor told me to "sign the contract you want." I wasn't about to writing my own contract and they started paying me anyway...so I basically got paid without a contract. Made it easier to open source what I wrote after the company failed. :)
TL;DR NEVER SIGN A NON-COMPETE. They are unethical.
TFA says:
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
This is where I think the Right Wing and Republicans get it wrong when it comes to business. They look at it as, what is best for business is what will drive business, but in the case of California, it is what is best for employees is what drives business. Who in their right mind would want to work in a state where business can keep you from leaving by creating non-compete contracts? People with talent are going to go where they think it is best for them. In the case of California, weather and not being locked into a company is what is best for them.
On a side note, I left a company in California that was based out of New Mexico and they told me I could not work in IT for three years because of the non-compete I signed with them. I laughed at them and told them to come to California and try to enforce it. Needless to say, I kept working in California.
Linux O Muerte!