To compete or non-compete

The enforcement of non-compete clauses in employee agreements encourages originality

In the growing start-up culture in India, the need to enforce non-compete clauses in employee agreements has become relevant. However, according to a study conducted by James Rauch, the enforcement encourages original ideas to find a way more easily than spin-offs and will restrict entry of socially profitable spin-offs. That said, Rauch says that non-enforcement helps the social welfare of the company more. In fact, entrepreneurs might also face constraints if lenders know that they have to buy out their non-competes to start the company. 

Title: Dynastic Entrepreneurship, Entry and Non-Compete Enforcement

Source: National Bureau for Economic Research


You don’t want to be left behind. Do you?

Our work is exclusively for discerning readers. To read our edgy stories and access our archives, you’ve to subscribe