Matt Marx

Mobility, Skills, and the Michigan Non-Compete Experiment

Whereas a number of studies have considered the implications of employee mobility, comparatively little research has considered institutional factors governing the ability of employees to move from one firm to another. This paper explores a legal constraint on mobility---employee non-compete agreements---by exploiting Michigans apparently inadvertent 1985 reversal of its non-compete enforcement policy as a natural experiment. Using a differences-in-differences approach, and controlling for changes in the auto industry central to Michigans economy, we find that the enforcement of non-competes indeed attenuates mobility. Moreover, non-compete enforcement decreases mobility more sharply for inventors with firm-specific skills and for those who specialize in narrow technical fields. The results speak to the literature on employee mobility while offering a credibly exogenous source of variation that can extend previous research on the implications of such mobility.

Managing Creativity in Small Worlds

Greater job mobility among engineers and scientists has caused the extended social networks of inventors to become increasingly connected. As a result, invention increasingly occurs within small worlds (or social networks) that straddle firm boundaries. Small worlds provide both strategic opportunity and potential threat; while they can increase creativity within a firm, they also aid in the diffusion of creative knowledge to other firms through personnel and knowledge transfer. Firms that operate within small worlds such as in Silicon Valley long agolearned to manage invention in an environment of rampant knowledge spillovers across firm boundaries. Now, however, all firms need to learn how to manage innovation in a small world environment. This article offers them advice about how to do this. (Publisher’s Abstract)

CLUES: dynamic personalized message filtering

Workgroups that defy traditional boundmies require successful communication among people whose interests, schedules, and locations may differ and are likely to change rapidly. CLUES is a dynamic personalized message filter that facilitates effective communication by prioritizing voice and text messages using personal information found in an individual’s work environment. CLUES infers message timeliness by considering calendar appointments, outgoing messages and phone calls, and by correlating these “clues” via a personal rolodex. Experience shows that CLUES can be especially useful to mobile users with high message traffic who often access their messages over the telephone.

The Firm Strikes Back Non-compete Agreements and the Mobility of Technical Professionals

This study explores how firms shape labor markets and career paths using employee non-compete agreements. The sociology of work has overlooked non-competes, but data indicate that nearly half of technical professionals in the United States are asked to sign such employment contracts. Fearing loss of investments in talent and trade secrets, firms use non-competes to “strike back” against technical professionals’ increased mobility following the decline of internal labor markets. In-depth interviews with 52 randomly sampled patent holders in a single industry, coupled with a survey of 1,029 engineers across a variety of industries, reveal that ex-employees subject to non-competes are more likely to take career detours—that is, they involuntarily leave their technical field to avoid a potential lawsuit. Moreover, firms strategically manage the process of getting workers to sign such contracts, waiting for workers’ bargaining position to weaken. These findings inform our understanding of the social organization of work in the knowledge economy.

Putting people first: specifying proper names in speech interfaces

Communication is about people, not machines. But as firms and families alike spread out geographically, we rely increasingly on telecommunications tools to keep us “connected”. The challenge of such systems is to enable conversation between individuals without computational infrastructure getting in the way. This paper compares two speech-based communication systems, Phoneshell and Chatter, in how they deal with the keys to communication: proper names. Chatter, a conversational system using speech-recognition, improves upon the hierarchical nature of the touch-tone based Phoneshell by maintaining context and enabling use of anaphora. Proper names can present particular problems for speech recognizers, so an interface algorithm for reliable name specification by spelling is offered. Since individual letter recognition is non-robust, Chatter implicitly disambiguates strings of letters based on context. We hypothesize that the right interface can make faulty speech recognition as usable as TouchTones—even more so.

REGIONAL DISADVANTAGE? NON-COMPETE AGREEMENTS AND BRAIN DRAIN

We construct inventor career histories using the U.S. patent record from 1975 to 2005 and demonstrate a brain drain among patenting inventors from states that enforce employee non-compete agreements to those that do not. Non-compete enforcement appears to drive away inventors with greater human and social capital. We address causality-related concerns with a difference-in-differences study design based on an inadvertent reversal of Michigans non-compete enforcement policy.

Managing innovation in small worlds

This publication contains reprint articles for which IEEE does not hold copyright. Full text is not available on IEEE Xplore for these articles.

The Value of Employee Retention: Evidence From a Natural Experiment

We estimate the firm-level returns to retaining employees using difference-in-differences analysis and a natural experiment where the enforcement of employee noncompete agreements was inadvertently reversed in Michigan. We find that noncompete enforcement boosted the short-term value of publicly traded companies by approximately 9%. The effect is increasing in local competition and growth opportunities, and offset by patenting.

Non-compete Agreements: Barriers to Entry…and Exit?

This chapter describes recent research on postemployment covenants not to compete, as well as potential policy implications of such research. We propose that non-competes are an underappreciated lever for policy makers to wield in effecting entrepreneurial outcomes. We review theory and models as well as qualitative and quantitative evidence from ourselves and others, at three levels of analysis. First, how do non-competes impact individual careers? Second, why do firms adopt non-compete agreements, and how do they affect the behavior and performance of firms? Third, what do we know of the regional implications of non-competes for entrepreneurship, productivity, and other measures? We observe that non-competes are generally favorable for established firms though less so for firms that are young, small, or not yet established. These benefits to firms appear to be offset by costs to individual workers, who are often unaware of non-competes when they accept an employment offer and end up with reduced opportunities for employment or entrepreneurship going forward. At the regional level, evidence is thinner but points again to the tension between the interests of established firms and those that do not yet exist. Ultimately, policy makers’ decisions whether or not to enforce non-competes should be driven by the extent to which they want to optimize for the preservation of established firms versus individual career flexibility and the founding and growth of new start-ups.

Executive Replacement in Venture Capital-Backed Startups

We show that venture capitalists add value in struggling startups by replacing executives. Augmenting a large database of entrepreneurial firm executives with handcollected join/departure dates, we ...