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Wrongful Discharge Laws and Innovation
2013
The Review of financial studies
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
doi:10.1093/rfs/hht009
fatcat:rejdpctqeberfcha5g3gas7qj4