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July 24, 2019

Did your best employee just quit? Maybe that's a good thing.

Daily Briefing

    Editor's note: This popular story from the Daily Briefing's archives was republished on Aug. 28, 2020.

    Employers often "go to great lengths" to keep high performers from moving to a competitor, but a recent study suggests employees who hop between companies can actually have a mutual benefit for their future and former employers, the study's authors, Stefan Wagner and Martin Goossen, write in Harvard Business Review

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    Wagner is an associate professor of strategy at ESMT Berlin, and Goossen is an assistant professor in the Department of Management of Tilburg University.

    Study details

    For the study, Wagner and Goossen sought to determine whether companies can benefit from "mobile employees," or those who leave one company for a competitor. To do so, they focused on pharmaceutical R&D collaborations, in which drugmakers establish partnerships with competitors in order to save money on drug development.

    The researchers performed interviews with 15 pharmaceutical executives based in the United States, the United Kingdom, Germany, and France who were behind R&D collaborations at their respective drug companies to discuss their motives behind the partnerships and barriers they might have encountered to selecting partner companies.

    The researchers also developed a dataset on the partnerships using data from 55 of the largest pharmaceutical companies between 1990 and 2005. The data included information on more than 100,000 scientists that worked for the companies, as well as which scientists changed firms.

    Key findings: People who leave can help build bridges

    The researchers found that more than 8,000 scientists moved between competing companies over 16 years. In addition, they found companies were 33% more likely to form an R&D collaboration with another company if one of their scientists moved between the two partnering firms in the last five years.

    And a deeper dive into the data revealed that scientists that changed firms also led to "more fruitful" alliances, according to Wagner and Goossen. "The number of patents filed within three years, a common indicator of innovation performance, was nearly twice as high when compared to alliances not involving mobile scientists," Wagner and Goossen write.

    Further, they found that mobile employees were more effective in building bridges based on the number of colleagues they'd collaborated with at their old company. "Having collaborated (on a patented invention) with an additional five colleagues at the former company increases the likelihood of alliance formation by an additional 20%," Wagner and Goossen write.

    How employees who leave can help build bridges

    According to Wagner and Goossen, mobile scientist acted as "bridges" between the two employers "by identifying opportunities for collaboration and by facilitating the negotiation process of forming the alliance." They added, "Mobile scientists can be a valuable asset in this search [for alliances], as they know the technological skills and needs of both their former and their new employer. If they see a match, they can speed up the process of initiating discussions."

    And while companies spend a great deal of effort protecting information about their companies through non-compete agreements, trade secret protection, and more, Wagner and Goossen determined that "[i]t can be beneficial for competitors to know what capabilities you have."

    Toward that end, Wagner and Goossen quote an pharmaceutical executive who said, "If an employee who created twenty patents for you moves on to a competitor, he can't take those patents with him anyway. To the contrary, the protected knowledge that he transfers might even increase your chances to find a future partner for research alliances."

    In conclusion, Wagner and Goossen write, "Losing highly skilled employees is certainly not a reason to celebrate, but bemoaning them is not a sensible approach either." They continue, "Managers of the hiring firms can reap the benefits of mobile employees by actively involving them in strategic decisions that would benefit from their unique experience and information about competitors" (Wagner/Goossen, Harvard Business Review, 7/2).

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