Noncompetes and Employee Mobility

We study the relationship between employment noncompetition agreements and employee mobility patterns using novel data from the 2014 Noncompete Survey Project. Specifically, we examine how noncompetes relate to the duration and nature of employee mobility, and we leverage our detailed individual-level survey data to identify and explore the precise mechanisms underlying the relationships we observe. We find that individuals with noncompetes appear to exhibit materially longer tenures and are more likely to depart for new employers that do not “compete” with their prior employers. To account for these patterns, we investigate the role noncompetes may play at each stage of the mobility “process”: job search, employer recruitment, offer receipt, negotiation, offer acceptance, etc. We present evidence that employees bound by noncompetes substitute job search activity and receptivity to recruitment in the direction of noncompetitors and that noncompetes are a factor in the choice to turn down approximately 40 percent of the offers employees receive from competitors. ∗ We gratefully acknowledge support from the Ewing Marion Kauffman Foundation Grant 20151449 and the William W. Cook Endowment of the University of Michigan. We appreciate helpful comments from Alex Tabbarrok, Ryan Nunn, seminar participants at Columbia University, the University of Michigan, the University of Maryland, the Society for Institutional and Organizational Economics, and the American Economic Association. The authors would like to thank the following entities from the University of Michigan for providing the funds to collect the data: the University of Michigan Law School, the Ross School of Business, the Rackham Graduate School, the Department of Economics MITRE, and the Office of the Vice President for Research. We are also grateful to Justin Frake for excellent research assistance. The contents of this work are solely our responsibility.