Inter-firm Migration of Tacit Knowledge: Law and Policy(1)

Much knowledge is diffused by the exchange of property rights in intangibles. But tacit knowledge, not being subject to property rights, is instead diffused by migration of knowledgeable individuals between firms. The law impacts significantly on this diffusion mechanism, in particular those rules that determine the use individuals may make of their tacit knowledge after migration to a different firm. The general principle underlying the relevant law is that individuals are free to migrate with all their tacit knowledge. Nonetheless there are some narrow exceptions to this principle. That these exceptions remain narrow and carefully policed by the courts is important because imposing too many restraints on use of tacit knowledge postterm would have a negative impact on real innovation.