TY - JOUR TI - The dual role of employee non-compete agreements DO - https://doi.org/doi:10.7282/t3-077c-te39 PY - 2018 AB - Human capital, or the knowledge, skills, and abilities of employees, can be a powerful driver of firm performance, yet the mobility of human capital raises questions over how to protect it. Employee non-compete agreements, which limit an employee’s ability to start or join a rival firm, have received recent attention, but prior research has focused on the role of non-competes as individual mobility restrictions and questioned the ethics of such agreements. This three-paper dissertation considers whether employee non-compete agreements can be ethically or economically good for firms by exploring three distinct contexts: (1) regardless of state policy, when, how and for whom should firms use non-competes; (2) when a state chooses not to enforce out-of-state employee non-competes; and (3) when a state strengthens enforcement of employee non-competes. In “The Case for Ethical Non-Compete Agreements: Executives versus Sandwich-makers,” I assert that the espoused ethical tension of non-competes over questions of property rights is due to concerns over power, autonomy, and fairness. I suggest an ethical employee non-compete agreement exists when appropriate consideration to these attributes has been made during the negotiations between the firm and employee. I then apply the resource-based view of the firm to conceptualize employee non-compete agreements as isolating mechanisms that insulate firm human capital from rivals. In “Opening the Labor Market Doors: Firm Performance Following California’s Refusal to Enforce Out-of-State Employee Non-Compete Agreements,” I exploit a quasi-natural experiment of a California Supreme Court decision, and find that this decision dramatically increased the performance of in-state firms. Moreover, this relationship was influenced by both local labor market and firm-specific resource factors. Finally, in “Don’t Mess with My Texans: Firm Performance in the Wake of Texas’ Increased Enforcement of Employee Non-Competes,” I find that firm performance can also be increased by strengthened enforcement of employee non-competes. While I find no support for labor market factors in altering this relationship, the effect of firm-specific resource factors persists. This dissertation therefore bridges both strategic management and business ethics literature. Read together, the essays demonstrate the ability of employee non-competes to enable firms to ethically create and sustain human capital-based competitive advantages. KW - Management KW - Covenants not to compete LA - eng ER -