Tuesday, August 19, 2008

Study: Non-compete clauses stifled early Route 128 tech growth

By Mass High Tech Staff

Non-compete clauses may have been the deciding factor in the Route 128 technology sector falling behind Silicon Valley in the 1970s and 1980s, according to a study performed at the University of Toronto.

The Rotman School of Management study found that laws enforcing non-compete clauses initially gave the Route 128-area companies the protection they needed to create new inventions in a young tech industry. As the industry grew, the non-compete clauses stifled growth by limiting labor mobility, according to the study.

California gained an advantage because its lack of non-compete clauses allowed employees to create their own businesses based on knowledge acquired at other companies.

The researchers, husband-and-wife team of April Franco and Matthew Mitchell, said their research can help understand how protecting intellectual property can affect industry growth. The pair said the research outlines a structure for knowing when non-compete clauses help a local industry and when labor mobility is more desirable.