This distortionary effect is amplified if the knowledge acquired by key employees is to a large extent tacit knowledge (see Polanyi, 1966, Cowan et al., 2000) that cannot be fully codified and therefore can only be imperfectly applied by the incumbent after the employee has left. An extensive empirical literature has shown that tacit knowledge is an important feature of highly innovative sectors, like the biotechnology industry (see e.g. Zucker et al., 1998) and the computer industry (see Saxenian, 1994, Fallick et al., 2006).