Wrongful Discharge Laws and Innovation
Acharya, V V and Baghai, R and Subramanian, K (2012) Wrongful Discharge Laws and Innovation. Working Paper. SSRN. (Unpublished)
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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 the hold-up, these laws enhance employees' innovative efforts and encourage firms to invest in risky, but potentially mold-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.
| Affiliation: | Indian School of Business |
|---|---|
| ISB Creiators: |
ISB Creators ORCiD Subramanian, K UNSPECIFIED |
| Item Type: | Monograph (Working Paper) |
| Uncontrolled Keywords: | Laws, Innovation, Discharge Laws |
| Subjects: | Finance Policy |
| Depositing User: | Ilayaraja M |
| Date Deposited: | 09 Jun 2019 13:30 |
| Last Modified: | 09 Jun 2019 19:20 |
| URI: | http://eprints.exchange.isb.edu/id/eprint/1058 |
| Publisher URL: | https://www.nber.org/papers/w18516 |
| Related URLs: |
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