Higher Education and Corporate Innovation

62 Pages Posted: 20 Jul 2020 Last revised: 7 Aug 2020

See all articles by Dongmin Kong

Dongmin Kong

Department of Finance, Huazhong University of Science and Technology; School of Finance, Zhongnan University of Economics and Law

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen

Jian Zhang

School of Business and Management, Shanghai International Studies University

Date Written: August 7, 2020

Abstract

This paper investigates the impact of higher education on corporate innovation. To establish causality, we exploit a policy-induced exogenous shock in the supply of Chinese college-educated labor starting in 2003. Using a difference-in-differences approach, we find that Chinese firms in skilled industries generate better innovation outcomes as measured by patents and citations than those in unskilled industries. This effect is more pronounced among firms headquartered in a province with more science and engineering college graduates, young firms that are more likely to hire young graduates, and firms located near universities. Moreover, higher education expansion increases a firm’s innovative human capital in terms of the number of educated employees and inventors. Finally, we show that technological innovation is a mechanism through which higher education affects productivity growth and, thus, the economy.

Keywords: corporate innovation; higher education expansion; human capital; high-skilled labor; China

JEL Classification: G38; J24; O31

Suggested Citation

Kong, Dongmin and Zhang, Bohui and Zhang, Jian, Higher Education and Corporate Innovation (August 7, 2020). Available at SSRN: https://ssrn.com/abstract=3636621 or http://dx.doi.org/10.2139/ssrn.3636621

Dongmin Kong

Department of Finance, Huazhong University of Science and Technology ( email )

Wuhan, Hubei 430074
China

School of Finance, Zhongnan University of Economics and Law ( email )

Wuhan, Hubei 430073
China

Bohui Zhang (Contact Author)

The Chinese University of Hong Kong, Shenzhen ( email )

Jian Zhang

School of Business and Management, Shanghai International Studies University ( email )

550 Dalian Road (West)
Shanghai, Shanghai 200083
China

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