Recruiting for Ideas: How Firms Exploit the Prior Inventions of New Hires

50 Pages Posted: 5 Apr 2010 Last revised: 29 Oct 2014

See all articles by Jasjit Singh

Jasjit Singh

INSEAD

Ajay Agrawal

University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Date Written: April 2010

Abstract

When firms recruit inventors, they acquire not only the use of their skills but also enhanced access to their stock of ideas. But do hiring firms actually increase their use of the new recruits' prior inventions? Our estimates suggest they do, quite significantly in fact, by approximately 202% on average. However, this does not necessarily reflect widespread "learning-by-hiring." In fact, we estimate that a recruit's exploitation of her own prior ideas accounts for almost half of the above effect. Furthermore, although one might expect the recruit's role to diminish rapidly as her tacit knowledge diffuses across her new firm, our estimates indicate that her importance is surprisingly persistent over time. We base these findings on an empirical strategy that exploits the variation over time in hiring firms' citations to the recruits' pre-move patents. Specifically, we employ a difference-in-differences approach to compare pre-move versus post-move citation rates for the recruits' prior patents and the corresponding matched-pair control patents. Our methodology has three benefits compared to previous studies that also examine the link between labor mobility and knowledge flow: 1) it does not suffer from the upward bias inherent in the conventional cross-sectional comparison, 2) it generates results that are robust to a more stringently matched control sample, and 3) it enables a temporal examination of knowledge flow patterns.

Suggested Citation

Singh, Jasjit and Agrawal, Ajay, Recruiting for Ideas: How Firms Exploit the Prior Inventions of New Hires (April 2010). NBER Working Paper No. w15869. Available at SSRN: https://ssrn.com/abstract=1583810

Jasjit Singh (Contact Author)

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Ajay Agrawal

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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