It has long been accepted wisdom that one of the ways Silicon Valley differs from other parts of the country is that people move from company-to-company more. The result, of course, should be more diffusion of knowledge and innovations, with people taking that sort of thing with them in their heads as they move around — human capital externalities, as economists say.
While I had never seen the notion tested, some economists at the Federal Reserve have remedied the situation — and the results are cautionary for anyone trying to reconcile non-compete agreements with regional economic development:
Jop-Hopping in Silicon Valley: Some Evidence Concerning the Micro-Foundation of a High Technology Cluster
Bruce Fallick, Charles Fleischman, and James B. Rebitzer
Abstract: In Silicon Valley’s computer cluster, skilled employees are reported to move rapidly between competing firms. If true, this job-hopping facilitates the reallocation of resources towards firms with superior innovations, but it also creates human capital externalities that reduce incentives to invest in new knowledge. Outside of California, employers can use non-compete agreements to reduce mobility costs, but these agreements are unenforceable under California law. Until now, the claim of “hyper-mobility” of workers in Silicon has not been rigorously investigated.
Using new data on labor mobility we find higher rates of job-hopping for college-educated men in Silicon Valley’s computer industry than in computer clusters located out of the state. Mobility rates in other California computer clusters are similar to Silicon Valley’s, suggesting some role for state laws restricting non-compete agreements. Outside of the computer industry, California’s mobility rates are no higher than elsewhere.