Abstract
Innovating firms face a risk of knowledge leakage as their workers can join competitors. We study the threat of worker departure as the key mechanism through which firms decide on knowledge protection strategies. Our empirical analysis exploits a milestone court decision in 1998 whereby the California Court of Appeal ruled that out-of-state noncompetes are not enforceable in California. Consequently, non-California firms faced a loophole in the enforcement of noncompetes for their workers. When facing a higher threat of worker departure, firms strategically increase patent filings as a means of knowledge protection. The effects are magnified for large-sized firms and those in complex product industries. Further tests on the possession of trade secrets, physical proximity, migration rate, and industry dissimilarity to California support our theoretical account.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
