Using Non-Compete Laws to Spur Economic Development in Massachusetts

April 21, 2009

Lee Fleming, Alfred Weatherhead III Professor of Business Administration, Harvard Business School, co-author of “The Evolution of Investor Networks in the Silicon Valley and Boston Regions,” Advances in Complex Systems (2007).
Matt Marx, Doctoral Candidate, Harvard Business School
Commentary by
State Representative William Brownsberger, Massachusetts House of Representatives
Robert Fisher, Partner and Deputy Chair, Labor Department, Foley Hoag LLP and
Bijan Sabet, General Partner, Spark Capital
Massachusetts, like many states, allows firms in knowledge-intensive fields to limit their employees' ability to take jobs with other firms. These "non-compete" restrictions help firms because they limit the disclosure of trade secrets, honor customer confidentiality, and prevent competitors from appropriating employees' specialized skills and knowledge. But new analyses based on a "natural experiment" in Michigan suggest that the restrictions should be reconsidered because they can stymie individual innovation, which in turn may hamper regional economic development.