Trade Secrets, Non-Competes, and Inventor Mobility: Empirical Evidence

Abstract

As they change jobs, scientists and engineers carry knowledge from one employer to another. Spillovers of knowledge, and so, innovation and economic growth, depend on institutions that influence professional mobility. Here, I investigate the impact of U.S. state-level trade secrets law on the movement of inventors among employers within states. Using patent assignments to track inventor moves, I find that mobility was negatively associated with the stock of trade secrets cases, but not the enactment of a trade secrets statute or the stock of cases on covenants not to compete. Specifically, a 1% larger stock of trade secrets cases was associated with 0.3% (+/-0.1%) lower inventor mobility. The empirical findings were robust to differences in the rate of depreciation of legal cases and the measure of change of employer, and various falsification tests.