Research Seminar by Wang Qi | No-poaching Agreements and Entrepreneurship of IT Professionals: Evidence from the United States

No-poaching Agreements and Entrepreneurship of IT Professionals: 
Evidence from the United States

How do no-poaching agreements aimed at retaining IT professionals affect the entrepreneurship of IT professionals? We answer this question by leveraging the data on no-poaching agreements of eight leading tech companies in Silicon Valley that restricted the mobility of information technology (IT)professionals to rival firms. We argue that a) no-poaching agreements increase the likelihood of IT professionals experiencing unmet salary expectations, motivating them to consider alternative career options; b) no-poaching agreements limit job opportunities that would provide superior benefits to IT professionals, consequently leading them to start new businesses. Using a difference-in-differences approach and leveraging data from a major online professional social network platform, we find that the results support our hypotheses because the no-poaching agreements show a positive impact on the entrepreneurship of IT professionals leading them to establish their businesses. Moreover, our results indicate that the effects are more pronounced for IT professionals who graduated from elite institutions, possess prior entrepreneurial experience, and are located in areas with vibrant venture capital activities. This research contributes to the literature on IT career trajectories, IT entrepreneurship, and the impacts of labor-market monopsony. This study also has important practical implications for the career transitions of IT professionals, the HR strategies of companies, and public policy.