Study: Non-compete clauses hurt Route 128 growth

Massachusetts' Route 128 was eclipsed by Silicon Valley as the premier region for high-technology companies -- in part because of non-compete clauses, says a new study.

Non-compete clauses limit employees from using information they learned at a company and profiting from it elsewhere. However, two researchers found that while these clauses help industries in their infancy, they ultimately hamper further growth by putting the brakes on labor mobility, an important growth driver.

In 1965, high-technology industry employment along Route 128 was about three times as large as Silicon Valley's. Over the next decade, Silicon Valley grew to have 15 percent more employees; by the 1990s, the growth rate was three times as great. The northeastern region had laws that helped enforce non-compete clauses, while California did not.

These conclusions come in a paper by April Franco and Matthew Mitchell. The husband and wife team are researchers at the University of Toronto’s Rotman School of Management.
(By Angel Jennings, Globe correspondent)