Oct 17, 2019

AnnaLee Saxenian on Silicon Valley’s Lack of Noncompete Agreements

From Ars Technica

Senators propose near-total ban on worker noncompete agreements

By Timothy B. Lee

A bipartisan pair of senators has introduced legislation to limit the use of noncompete agreements across the US economy. Noncompete agreements ban workers from performing similar work at competing firms for a limited period — often one or two years. These agreements have become widely used in recent decades.

“Noncompete agreements stifle wage growth, career advancement, innovation, and business creation,” argued Sen. Todd Young (R-Ind.) in a Thursday press release. He said that the legislation, co-sponsored with Sen. Chris Murphy (D-Conn.), would “empower our workers and entrepreneurs so they can freely apply their talents where their skills are in greatest demand.”

But supporters of broader reforms have a powerful counterexample: California. For decades, the Golden State has had the nation's strictest laws against noncompetes, effectively banning the practice. Despite that — or maybe because of it — the state has become a powerful center for high-tech innovation.

In an influential 1994 book, political scientist AnnaLee Saxenian argued that a key factor in Silicon Valley's economic success over the previous decades was the fact that employees could hop from job to job, taking their valuable skills with them. That freewheeling culture helped good ideas developed at one company to quickly spread elsewhere, ultimately benefitting the entire regional economy.

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AnnaLee (Anno) Saxenian is a professor in the School of Information at the University of California, Berkeley. Her scholarship focuses on regional economies and the conditions under which people, ideas, and geographies combine and connect into hubs of economic activity.

Last updated:

October 23, 2019