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Do Unions Affect Innovation?

Management Science, Forthcoming

48 Pages Posted: 13 Mar 2013 Last revised: 24 Aug 2015

Daniel Bradley

University of South Florida

Incheol Kim

University of Texas - Rio Grande Valley - College of Business and Entrepreneurship

Xuan Tian

Tsinghua University - PBC School of Finance

Date Written: August 23, 2015

Abstract

We examine the causal effect of unionization on firm innovation. To establish causality, we use a regression discontinuity design relying on “locally” exogenous variation generated by elections that pass or fail by a small margin of votes. Passing a union election leads to an 8.7% (12.5%) decline in patent quantity (quality) three years after the election. A reduction in R&D expenditures, reduced productivity of current and newly hired inventors, and departures of innovative inventors appear plausible mechanisms through which unionization impedes firm innovation. Our paper provides new insights into the real effects of unionization and has important implications for policy makers when they alter union regulations or labor laws to encourage innovation.

Keywords: Innovation; labor unions; hold-up; shirking; inventor departures

JEL Classification: G31, O31, O32, J51

Suggested Citation

Bradley, Daniel and Kim, Incheol and Tian, Xuan, Do Unions Affect Innovation? (August 23, 2015). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2232351 or http://dx.doi.org/10.2139/ssrn.2232351

Daniel Bradley

University of South Florida ( email )

Tampa, FL 33620
United States

Incheol Kim

University of Texas - Rio Grande Valley - College of Business and Entrepreneurship ( email )

1201 W University Dr
Edinburg, TX 78539
United States

Xuan Tian (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

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