Virginia Postrel has a very nice new article that describes some theories supporting how job hopping may positively contribute to innovation. She cites the case of comparing Silicon Valley to Route 128 as I did in an earlier post (but where I cited the scenario in the context of venture capital and employee-friendy laws in California over Boston as a key explanatory variable on differences in amount of venture money).
There’s a paragraph in her writeup that triggered another thought. Here’s the paragraph:
When employees jump from company to company, they take their knowledge
with them. "The innovation from one firm will tend to bleed over into
other firms," Professor Rebitzer explained. For a given company, "it’s
hard to capture the returns on your innovation," he went on. "From an
economics perspective, that should hamper innovation."
I don’t necessarily agree (or disagree) with Professor Rebitzer here. Just because an employee (a supplier) can take their knowledge over to another firm does not mean from an economics perspective that innovation should be hampered. I offer another hypothesis (which is not supported by any data) – that employees in Silicon Valley look at their employers as a market. That net-net employees will choose to work for firms that have better business models and can appropriate the returns of good ideas. Perhaps because of better business models (or better hype), such companies have better future free cash flows and can pay better. Thus, the good ideas that come out of innovation will naturally travel to where the market of employers can best put it to use. This does not necessarily mean that innovation will be diluted across firms as suggested above.
But back to those Silicon Valley people, are they just not loyal to their employers if they are hopping around so much? Maybe time just moves faster in Silicon Valley … 😉