The Impact of Restricting Labor Mobility on Corporate Investment and Entrepreneurship

This paper examines how labor mobility restrictions like noncompete agreements affect firms' investment decisions. Using matched employee-employer data from LinkedIn, I show that increases in the enforceability of noncompete agreements lead to widespread declines in employee departures, specifically in knowledge-intensive occupations. Established firms that rely more on these knowledge-intensive occupations increase their investment rate in physical capital. However, new firm entry in corresponding sectors declines. I provide evidence for different mechanisms to explain these patterns. Together, the findings show that labor frictions play an important role in investment decisions.

• Publication year

  2019

• Venue

  The Review of financial studies

• Publication date

  2019-12-24

• Fields of study

  Business, Economics

• Identifiers
  DOI 10.2139/SSRN.3040393
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

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