Innovation Investment and Labor Mobility: Employee Entrepreneurship from Corporate R&D
Posted: 26 Dec 2018
Date Written: May 15, 2019
This paper studies how corporate research and development (R&D) investment affects labor mobility. We use employer-employee matched data in ordinary least squares and instrumental variables analyses to assess four hypotheses. R&D has no effect on worker retention, exit from employment, or mobility to incumbent firms. Instead, it increases employee departures to entrepreneurship, leading employees to join the founding teams of startups that are venture capital-backed, high tech, high wage, and in different sectors than the parent firm. These high-growth, high-risk startups emerging from R&D benefit from a focused, standalone incentive structure and have poor complementarities to the parent firm’s assets.
Keywords: Innovation, R&D, Entrepreneurship, Investment
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