The Silver Lining To Losing Innovative Employees

Mobile employees can act as bridges

It is reasonable to assume that a company would try its best to hold on to their employees. They have invested time and money into hiring and training them to be part of the company and don’t want to lose them. Often, a company will put special effort into keeping employees from leaving to work for rival companies relying on employee benefits, trade secret protection, non-compete clauses, and other legal means. However, a study I conducted alongside Martin Goossen from Old Dominion University in Virginia, highlights that losing key employees to a competitor isn’t all bad, and can, in fact, lead to more successful collaboration opportunities.

Our research focused on R&D collaborations between major pharmaceutical companies. Alliances between these companies are common as they help to reduce the financial burden of costly drug development. Data was collected on these strategic alliances amongst the 55 largest pharmaceutical firms from 1990 to 2005, identifying all patenting scientists that moved between these firms. Results showed that it was quite common for scientists to move between competing pharmaceutical companies. 

When a scientist moved between two firms, the chances of their new and old employer forming an R&D alliance increased by 33% on average. Also, employees moving from one company to another not only led to more frequent alliance, but also more successful ones; the number of patents filed within three years was almost twice as high compared to alliances not involving scientists that had worked for both companies. Furthermore, these companies were more likely to collaborate again in the next three years.

It can be a difficult and time-consuming process for companies to find suitable partners for collaboration; they have to be constantly aware of emerging trends in technology and identify partners with skills that match their needs. Even after finding a suitable partner, potential collaborations can break down leading to a loss of resources and opportunities. If the employee who has worked with both companies is involved in the alliance formation process, they can then act as ‘bridges’ to facilitate the forming of highly successful alliances between the old and new employers. The benefits of these alliances can outweigh the cost of losing an innovative employee in the first place.

After interviewing high-ranking pharmaceutical executives responsible for business development, it became apparent that mobile employees can act as bridges in two ways:

Also, scientists who had collaborated with more colleagues at their previous company were more effective in building bridges between their new and former employers, as they had a deeper understanding of their old firms’ capabilities and needs.
 

Managers of hiring firms can take advantage of mobile employees by actively involving them in strategic decisions that would benefit from their unique experience and information on competitors. For example, some firms connect employees hired from a potential partner with the team responsible for carrying out due diligence prior to forming an alliance.

Losing highly skilled and innovative employees is certainly not something that should be celebrated or encourages, but our research findings do demonstrate that there is at least an upside: from interviews we could tell that executives do value mobile employees for how they improve the speed and stability of forming alliances with competitor firms.

These findings not only apply to the formation of R&D alliances are also applicable to many inter-organizational collaborations, including negotiations of outsourcing contracts, formal joint ventures, and merger and acquisition decision-making. The results from our study show that, although it is far from ideal to lose an innovative employee to a rival company, there may at least be a silver lining.