The only empirical study on the question proves employee ownership protections jumpstart innovation

[Shashwat, Krishnamurthy, “Does Strengthening the Property Rights of Employee-Inventors Spur Innovation? Empirical Evidence on Freedom-to-Create Laws Passed by US States,” Journal of Law and Economics 66, GDI-JCR]

Overall, these results lead us to infer that pathbreaking, albeit riskier, innovation increased following a change in law. Our tests also help mitigate the concern that a change may not increase innovation activity per se but result in an increase in patenting activity if firms file patents mainly to increase the hurdles for their employees to pursue their inventions after leaving. Such strategic behavior by firms also implies an increase in patents, albeit of inferior quality. Given our findings showing an increase in the quality of innovation, the aggregate effects we document are unlikely to be explained by an increase in strategic patenting by firms. To explore the underlying mechanisms, we study the effects on firm-specific versus generic innovation. Recall that we find an increase in both explorative and exploitative patents. As exploitative patents build on a firm's preexisting innovation, they are more likely to represent firm-specific innovation. In contrast, explorative innovation does not build on preexisting innovation by a firm and is likely to be generic or pathbreaking. Prior research documents that novel and explorative innovation is more likely to be pursued outside the boundaries of incumbent firms (Acemoglu and Cao 2015; Bernstein 2015; Akcigit and Kerr 2018). Even when explorative innovation is pursued inside the boundaries of an incumbent firm, it is more likely to be pathbreaking innovation that resulted from generic innovation. Admittedly, exploitative innovation does not correlate perfectly with firm-specific innovation, nor does explorative innovation correlate well with generic or pathbreaking innovation. However, the increase in both explorative and exploitative innovation suggests an increase in both generic and firm-specific innovation.4 To cleanly investigate if a change in law led to innovation within and/or outside the boundaries of the incumbent firms, we examine the effect on patenting activity by incumbent and new innovator firms, defined as those filing patents for the first time. The rate of increase in patents by both new firms and incumbent firms is the same at 18 percent. To cleanly distinguish firm-specific innovations from generic innovations, we define blue-sky innovation as patents attributed to firms that file a patent for the first time and to employees who either were employed at another firm (not the firm filing the patent) or filed a patent shortly after leaving an employer. The idea underlying this measure is to capture innovations by employee-inventors that were clearly pursued outside the boundaries of their existing employers and are thus likely to be generic. We find a 22 percent increase in blue-sky innovation by new firms. Furthermore, the effect manifests only for first-time innovators and not for existing firms. We conclude that these results collectively support the thesis that the change in law led to an increase in both firm-specific and generic innovation.5 Overall, our study provides evidence supporting the idea that in an environment where firms have more power to hold up their employees than employees have to leverage, firm-level innovation can be fostered by allocating property rights over innovations to employees. Our study supports the arguments of some legal scholars that the policy of employers' ownership of most innovations drains individual creativity and stifles employees' will to innovate (Bartow 1996; Phillips 1981). As described above, a large body of theoretical literature studies the optimal allocation of property rights in traditional settings (Grossman and Hart 1986; Hart and Moore 1990; Hart 1995) and innovative environments (Aghion and Tirole 1994). However, to the best of our knowledge, ours is the first empirical paper to study the causal impact of the allocation of property rights to innovation between firms and their employees