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Do non-compete covenants affect entrepreneurship and incentives to innovate?: Findings from Europe
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Industrial Marketing and Entrepreneurship.
2019 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

Non-compete covenants are clauses in employment contracts that forbid employees from competing with their former employers during a given time period. Recent literature has identified non-compete covenants as a new type of entry barrier to entrepreneurship within high-tech industries, impeding regional innovation, growth and employment. In Europe, the legal regime is highly heterogeneous, suggesting that certain regions might gain a competitive advantage in innovation. This study uses Fixed Effects regression and Poisson Fixed Effects regression models to investigate the ways in which non-compete covenants effect how venture capital investments stimulate regional innovation and entrepreneurship. The data set was constructed using data from The European Patent Office, the Eurostat, the World Bank and the OECD Economic Outlook. Ius Laboris overview was used to assess the enforceability of non-compete covenants in sample countries. The results show that increased supply of venture capital increases innovative activity in all regions. Relative to countries that enforce non-compete covenants, countries that restrict the use of these contracts experience higher rates of patenting activity. The level of enforceability was not found to have significant effects on new firm formation. The results suggest that financial intermediates and the legal regime have an important role in promoting regional innovation.

Place, publisher, year, edition, pages
2019.
Series
TRITA-ITM-EX ; 2019:200
Keywords [en]
Non-Compete Covenants, Venture Capital, Economic Growth, Labor Market Economics, Employment, Entrepreneurship, Innovation
National Category
Economics
Identifiers
URN: urn:nbn:se:kth:diva-252753OAI: oai:DiVA.org:kth-252753DiVA, id: diva2:1320844
Educational program
Degree of Master - Economics of Innovation and Growth
Supervisors
Examiners
Available from: 2019-11-12 Created: 2019-06-05 Last updated: 2019-11-12Bibliographically approved

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CiteExportLink to record
Permanent link

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Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf