Non-Competition Agreements and Research Productivity in the Biotechnology Industry

This paper examines the impact of the state-level legal structure, namely the legal support for noncompetition agreements, on research productivity. Specifically, we study how California’s unique lack of non-competition agreement laws influences product develop when controlling for local munificence and firm-level technological capability. Our results indicate that California’s unique legal structure is negatively associated with research productivity as measured by the number of products in development at the time a biotechnology firm goes public. Further, firm size moderates this relationship such that the effect is stronger for smaller biotechnology firms.