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Babson College and the Noncompete Reform Debate in Massachusetts

After spending the last few weeks hearing our political leaders praise the ingenuity and the optimism that makes America great, I am even more proud to be working at Babson College – an institution with a mission to educate and support leaders of all kinds through the power of entrepreneurship — a force for economic and social value creation everywhere.

As a member of local and global innovation economies, Babson College has a long-standing commitment to a culture that fosters creativity, risk-taking, continuous improvement, leadership, and an entrepreneurial spirit — and encourages people to take the initiative and make a difference. This includes creating entrepreneurial ecosystems that are dynamic and growth-oriented — which is where the conversation about noncompete agreements comes in.

Noncompetes are agreements that are signed between an employee and a company at the start of their relationship which stipulates the employee cannot use information from their time at the employer in subsequent business efforts – typically there is a set time, in some cases, years. Employers want noncompetes because it protects them from an employee potentially taking what they know about this business to another company in the same industry or starting a business and gaining a competitive advantage because they know business practices, trade secrets or other sensitive information about their former employer. Yet the result can often mean that someone with a great idea for a new business who has gained experience from a company in that industry is stifled and / or delayed from establishing the new business because they have signed this agreement — even when there is nothing confidential about what they know or want to do that could hurt their former employer.

Noncompetes are not allowed in California and entrepreneurs in Silicon Valley have said, and this has also been proven, that noncompetes would have seriously impaired that region’s ability to become the world-wide hub of entrepreneurship and innovation. Yet here in Massachusetts, noncompetes are allowed. Many believe this has limited our innovation ecosystem from developing to its full potential over time.

Over the past several years, there has been much work on how to reform and perhaps even abolish noncompetes from our state’s legal system. Now, real reform is on the table. Following recent discussions and bills being introduced on the Senate and House floors, Beacon Hill is getting serious about the reform of noncompete agreements in Massachusetts. Many voices have contributed to this discussion, among them esteemed and well-regarded organizations that include Babson as a member. While we applaud the engagement of such organizations concerning this important issue, their stance does not appropriately reflect the viewpoints of Babson College. Given this situation and recent press coverage of the issue, I thought that it was important to provide a clear statement about where Babson College stands on this issue: we support meaningful reform of noncompetes.

Babson College, like many other institutions in the Boston Business Ecosystem, believes that such reform can benefit the growth and development of a healthy entrepreneurial ecosystem. As the leader in entrepreneurship education, we know that the innovators we want to foster and grow in Massachusetts need to be encouraged by policies that support this activity.

Our startup community will prosper when we can offer entrepreneurs an environment that encourages them to be bold and think big. We must avoid a situation where, according to research by Lee Fleming, Matt Marx, and Jasjit Singh, “inventors are leaving states that allow non-competes and moving to states that don’t.” It is extremely important, now more than ever, that we work together to create a healthy entrepreneurial ecosystem that thrives from the ingenuity and optimism that our Country and the Commonwealth of Massachusetts, where we are located, embodies.

As this continues to evolve, we look forward to participating in the larger conversation regarding noncompete reform, economic development and innovation in the Commonwealth.

Debi Kleiman
Executive Director, Arthur M. Blank Center for Entrepreneurship
Babson College