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Monday, October 11, 2010

Innovation Motivation

Would a post-employment non-compete restriction affect your performance on the job? My collaborator On Amir and I researched this question in an experimental setting. We find that under some circumstances, when the motivation to perform is mostly linked to extrinsic rewards, performance, as measured by task completion, effort and accuracy, falls. When tasks invoke more intrinsic motivation -- that is, the tasks are more interesting and thought-provoking -- non-competes have a lesser effect on performance. Would love to hear your thoughts and comments on our study, Innovation Motivation: Behavioral Effects of Post-Employment Restrictions. The full article is here. Here is the abstract:

While post-employment restrictions may encourage firms to invest in employee skill and research and development (R&D) such restrictions may also under certain circumstances discourage employees from investing in their own human capital and work performance. The article reports the findings of an original experimental study designed to unpack the effects of post-employment restrictions on task performance. The results demonstrate that under certain conditions of contractual restrictions, when tasks involve pure effort and are relatively easy to perform, individuals will abandon the tasks at higher rates, spend less time on task, and overwhelmingly fail more often to find the correct solution. At the same time, our findings show that under the same restrictions but different types of tasks – tasks that invoke internal talent and creativity rather than pure effort – some of these effects, including time on task and quality of performance, largely disappear. Significant gaps in task completion remain even under the more creative tasks. Traditional economic models view post-employment restrictions, primarily covenants not-to-compete, as necessary limitations stemming from the assumption that absent such contractual protections, employers would under-invest in research and development and employee training. This study enriches the analysis of human capital development and proposes a dyadic-dynamic investment model. It demonstrates in an experimental setting that regulatory and contractual background affects motivation and performance. The article complements recent empirical evidence about positive spillovers effects stemming from increased labor mobility with a behavioral analysis that suggests further positive effects, offering a nuanced view of the costs and benefits of post-employment contractual and regulatory restrictions.

 

Posted by Orly Lobel on October 11, 2010 at 03:01 PM | Permalink

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Comments

thanks viva -- i just downloaded your article - looks great; the two articles point to the same policy direction for sure!

Posted by: Orly Lobel | Oct 12, 2010 3:00:56 PM

I really enjoyed the article, and I included it in my discussion of recent empirical work on noncompetes in my (non-empirical) article arguing that noncompetes should simply be unenforceable. *shameless self-promotion: an early version of the article can be found here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1577271 and a revised version will be out in the William & Mary Law Review next month* It's great that so much work is being done in this area!

Posted by: Viva Moffat | Oct 12, 2010 1:36:03 PM

nice post frank!

Posted by: Orly Lobel | Oct 11, 2010 10:09:08 PM

http://lawprofessors.typepad.com/contractsprof_blog/2010/10/do-noncompetes-discourage-workers-from-improving-their-productivity.html

Posted by: Frank Snyder | Oct 11, 2010 5:48:45 PM

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