Legal Restrictions on Labour Mobility and the Development of R&D Clusters

by Assistant Professor Sampsa SAMILA, Assistant Professor Vivek TANDON & Distinguished Professor Ivan PNG

Given the considerable policy efforts in Singapore to develop high technology sectors in biotech and infocomm areas, it is important to understand how restrictions on labor mobility might affect those efforts. These restrictions primarily come in two forms: labor law, in particular non-compete clauses in labor contracts, and intellectual property law, in particular trade secrets.

Restrictions on labor mobility have been argued to hinder the development of research-intensive regional clusters by restricting the flow of talent and ideas. These same restrictions might also induce employees and employers to invest more in developing human capital. Thus the long-term effects are an open question in the current academic literature.

However, it is difficult to study these issues in Singapore since there is no within-country variation in these restrictions. Thus, it becomes impossible to separate cleanly the effect of the restrictions from other confounding factors. To overcome this difficulty, the project seeks to construct a longitudinal dataset of R&D laboratories in the United States where the PIs can find state-by-state variation in the restrictions. Key aspects of labor law and intellectual property law have already been coded.

Variously called Industrial Research Laboratories in the United States or Directory of American Research and Technology, a set of directories was published in 32 volumes from 1920 to 1999 documenting the evolution of R&D in the United States. The project will included scanning the directories and use optical character recognition (OCR) to digitize the information, followed by matching the information across the catalogs and with outside sources of information such as the US patent database and Compustat. Imperfections in the OCR process will require manual checking to correct before the matching can be done.

The development of R&D across states will be analyzed with a differences-in-differences methodology to identify the effect of legal changes. The results will be published in academic articles in top-tier journals as well as a brief policy report.