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Buying Loyalty: Theory and Evidence from Physicians

SSRN Electronic Journal
2018
  • 7
    Citations
  • 2,982
    Usage
  • 17
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    7
    • Citation Indexes
      7
  • Usage
    2,982
    • Abstract Views
      2,604
    • Downloads
      378
  • Captures
    17
  • Ratings
    • Download Rank
      158,526

Article Description

We study the question: why do skilled services firms use non-compete agreements (NCAs), which prohibit workers from leaving firms and competing against them? We conduct a survey of physicians linking the use of NCAs to labor market outcomes and firm performance, and show that by deterring the poaching of patients NCAs increase the rate of return to job-tenure, with larger effects in states with more enforceable NCA laws. These effects are consistent with NCAs enabling practices to allocate clients to new physicians through intra-firm patient referrals, reducing a form of investment holdup. We discuss an array of suggestive evidence supporting this as the primary explanation, although we find NCAs also provide benefits by reducing job turnover.

Bibliographic Details

Kurt Lavetti; Carol J. Simon; William White

Elsevier BV

Non-Compete Agreements; Human Capital; Compensation Contracts

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