Working Paper: CEPR ID: DP6039
Authors: Hans Krogh Hvide; Eirik Gaard Kristiansen
Abstract: We study how complementarities and intellectual property rights affect the management of knowledge workers. The main results relay when a firm will wish to sue workers that leave with innovative ideas, and the effects of complementary assets on wages and on worker initiative. We argue that firms strongly protected by property rights may not sue leaving workers in order to motivate effort, while firms weakly protected by complementary assets must sue in order to obtain positive profits. Firms with more complementary assets pay higher wages (and have lower turnover), but such higher pay has a detrimental effect on worker initiative. Our analysis suggests that strengthened property rights protection reduces turnover costs but weakens worker initiative.
Keywords: entrepreneurship; innovation; ipr; litigation; personnel economics; rd; startups
JEL Codes: E00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Weak protection by complementary assets (G19) | Firm must sue leaving workers (J65) |
| Firm must sue leaving workers (J65) | Adverse selection occurs (D82) |
| Adverse selection occurs (D82) | Unproductive workers remain (J29) |
| Weak protection by complementary assets (G19) | Negative profits (D41) |
| Strong protection by property rights (P14) | Firm may not sue leaving workers (J65) |
| Firm may not sue leaving workers (J65) | Higher worker initiative (J54) |
| Higher worker initiative (J54) | Risk of losing valuable employees (J63) |
| More complementary assets (G19) | Higher wages (J39) |
| More complementary assets (G19) | Lower worker initiative (J54) |
| Higher wages (J39) | Retain employees (M51) |
| Higher wages (J39) | Reduce motivation for innovation (O31) |
| Strengthened intellectual property rights (O34) | Reduces turnover costs (J63) |
| Strengthened intellectual property rights (O34) | Weaken worker initiative (J54) |