Wrongful Discharge Laws and Innovation / Viral V. Acharya, Ramin P. Baghai, Krishnamurthy V. Subramanian.

Format:

Book

Author/Creator:

Acharya, Viral V.

Contributor:

National Bureau of Economic Research.

Baghai, Ramin P.

Subramanian, Krishnamurthy V.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18516.

NBER working paper series no. w18516

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

We show that wrongful discharge laws - laws that protect employees against unjust dismissal - spur innovation and new firm creation. Wrongful discharge laws, particularly those that prohibit employers from acting in bad faith ex post, limit employers' ability to hold up innovating employees after the innovation is successful. By reducing the possibility of hold-up, these laws enhance employees' innovative efforts and encourage firms to invest in risky, but potentially mould-breaking, projects. We develop a model and provide supporting empirical evidence of this effect using the staggered adoption of wrongful discharge laws across the U.S. states.

Notes:

Print version record

November 2012.