Talent Market Competition and Firm Growth

Abstract

How does competition for talent affect firm growth? Combining establishment-level occupational employment microdata with job posting data, we measure a firm's talent retention pressure (TRP) based on other firms' job postings for talent in the local market. Our TRP captures CFOs' subjective talent retention concerns and predicts firms' talent outflows. We show that (i) TRP substantially dampens firms' capital investment; (ii) firms do not elastically retain talent when TRP is higher, yielding lower subsequent talent productivity; and (iii) TRP dampens primarily laggard firms' growth but not superstars', leading to a limited impact on aggregate U.S. investment but increased industry concentration.

Keywords: talent market competition, talent retention, corporate investment, superstar firms, investment-Q gap, industry concentration

JEL Classification: G3, J6