Innovation Spillovers from High-skilled Labor Shocks

Abstract

I present empirical evidence of innovation and technology spillovers among firms that are geographically proximate. By examining the impact of a high-skilled labor shock proxied by the lottery winning rate of H-1B visa applications for each firm in a specific year, I first show that firms experiencing an exogenous labor shock have a positive effect on both the quality and quantity of their innovative activities. Secondly, I present evidence that a diversified labor composition also diversifies the knowledge base and expands the range of expertise available within firms. Lastly, I provide evidence of innovation spillovers, whereby the increased innovative activities and expanded technology base of firms spill over into neighboring firms. The degree of these spillovers varies based on factors such as financing constraints, information asymmetry, and managerial motivation. I show that these innovation spillovers are facilitated through a mechanism of 'social interaction' where foreign high-skilled workers act as a conduit for idea-sharing and interaction, leading to a greater level of spillover effects.

Keywords: Spillovers, Technological Innovation, Knowledge Base, Social Finance, Immigrant Workers, Human Capital, Local Economy

JEL Classification: G41, J08, J24, J61, O32, O33