How firms competitively became non-competitive: the diffusion of CEO noncompete agreements, 1996–2015

Purpose This study aims to explore the diverse factors influencing the adoption of post-employment noncompete agreements (NCAs) between firms and their CEOs. Drawing on the organizational literature regarding the diffusion of contested organizational practices as well as research on law and organizations, this study seeks to understand how internal power dynamics, legal environments, as well as external economic shocks collectively shape organizational NCA adoptions among leading US corporations. Design/methodology/approach Using NCAs between Standard and Poor’s 500 firms and their CEOs in 1996–2015, this study uses discrete-time event history analysis to examine the impact of CEO duality, state legal environments regarding NCA enforcement and the Great Recession on the hazard ratios of organizational NCA adoption. Findings Organizations are less likely to enforce NCAs with duality CEOs, reflecting internal power dynamics and CEO influence within the organization. The study also finds that firms are more likely to have NCAs with CEOs in states where NCAs are easier to enforce and where partial NCA enforcement is permitted. Finally, the findings underscore how exogenous shocks, particularly the recent Great Recession, prompt firms to adopt NCAs to avoid additional disruptions from CEO turnover. Originality/value This study contributes to management research on the diffusion of contested organizational practices by uncovering various factors at multiple levels that drive the adoption of NCAs. Specifically, this study offers fresh insights into the intricacies of state NCA laws and how organizations respond to their legal environments. Moreover, it sheds light on how unexpected economic events, such as the Great Recession, influence organizations to embrace contested practices, expanding the study of organizational practices beyond conventional investigations of sociopolitical and institutional factors.