Bundling Postemployment Restrictive Covenants: New Evidence from Firm and Worker Surveys

Abstract : Many of a firm’s most important informational or relational resources are at risk of diffusion to its competitors because they are embedded in the firm’s human capital. Using novel firm- and worker-level data, we present descriptive evidence on the adoption of and outcomes associated with four post-employment restrictive covenants (PERCs) that limit the diffusion of such resources to competitors: non-disclosure agreements (NDA), non-solicitation agreements, non-recruitment agreements, and non-compete agreements. We find that firms tend to adopt these PERCs together, with just three combinations (no PERCs, only an NDA, all four) covering more than 82% of workers and 70% of firms. We examine two rationales for why firms might bundle PERCs together—value creation and pure value capture—and draw out and test their implications both for worker and firm outcomes and for adoption. Our results suggest that pure value capture is the likely rationale for bundling PERCs with the average worker, while value creation is more applicable to top managers. Finally, we document how studying just one PERC can be misleading when such PERCs are bundled.

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Hunting for Talent: Firm-driven Labor Market Search in the United States

Abstract : Research suggests that increased digitization of the labor market, combined with the changing demand for skill, has altered the job-search process. This article argues that these changes have led to increased investments in firm-driven search for talent (or `outbound recruiting'). We investigate this question by proposing a two-sector labor market model and using two data sets, one new, to corroborate our predictions. First, we conduct a nationally representative survey of over 13,000 American workers. We find that nearly 18 percent of all employed workers in the US were hired into their present company by their employer's outbound recruiting effort, a substantial increase over the 4.2 percent observed in prior surveys. Using a post-COVID survey, we find similar results. Moreover, the share of hiring driven by firm-driven search is greatest among higher-income workers, at 20.3 percent, and those with STEM and business degrees, at 20 percent. Considerable regional variation also exists with over a quarter of Silicon Valley workers hired in this manner, but only 14.5 percent of those in Rochester. Second, we complement our worker-level results by analyzing a large sample of job postings in the US economy over the past decade. We find that firms, especially those relying on high-skilled labor, are increasingly developing capabilities to better hunt for talent---hiring more recruiters with skill in online search. Given the growth of this practice, we discuss implications for research on firm strategy and labor markets.

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How Knowledge Scaling Reshapes Strategic Human Capital Management: Evidence from Acquisitions in Private Higher Education

Abstract : This paper addresses how knowledge scaling–the simultaneous deployment of the same knowledge resource across multiple organizational units–reshapes human capital management. Specifically, we examine acquisitions as sharp opportunities for organizations to scale knowledge and to reconfigure resources. The main argument in this paper is that knowledge scaling may create incentives for organizations to specialize workers on tasks that complement the knowledge being scaled while also weakening the worker-organization relationship when if such tasks rely less on worker-level knowledge that is less specific to the worker (e.g. tacit knowledge and experience). We articulate and find empirical support for these ideas in the context of private post-secondary education in Brazil, where educational groups engaged in a wave of acquisitions between 2006 and 2014 and scaled standardized courseware, pedagogical practices, and managerial processes to target units. Empirically, we combine in-depth interviews to econometric analyses using a unique dataset with information about characteristics of universities, faculty labor contracts, and acquisitions in the Brazilian private higher education market. Our results show that beyond performance gains, knowledge scaling increased the specialization of faculty work arrangements around teaching and led to a sustained increase in turnover rate. This paper contributes to the literatures on resource reconfiguration and on the multi-level nature of strategic human capital by advancing how a firm-level strategy to scale knowledge resources reshapes the nature of how organizations deploy workers as valuable resources.

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