Steering Labor Mobility Through Innovation

Fisher College of Business Working Paper No. 2023-03-029

Charles A. Dice Working Paper No. 2023-29

57 Pages Posted: 3 Jan 2024

See all articles by Song Ma

Song Ma

Yale School of Management; National Bureau of Economic Research (NBER)

Wenyu Wang

Indiana University - Kelley School of Business - Department of Finance

Yufeng Wu

Ohio State University (OSU)

Date Written: December 28, 2023

Abstract

This paper argues that firms proactively use innovation decisions to influence the mobility and human capital accumulation of their workers. We develop a dynamic model in which workers conduct R&D projects, accumulating both general and firm-specific human capital. Firms choose the scope of innovation, influencing the type of human capital workers accumulate during the process. Pursuing more general innovation leads to increased knowledge redeployability for the firm at the cost of more difficult employee retention. We estimate the model using granular innovation production and mobility data of three million inventors. Our model closely matches the observed mobility and innovation specificity over inventors' life cycles. Empirical estimates of the model parameters imply that 24% of observed innovation specificity among U.S. firms is driven by their labor market considerations, which enhances the firm value but lowers the inventors' surplus.

Keywords: Human Capital, Labor Mobility, Innovation, Inventors, Structural Estimation

JEL Classification: O31, OJ63, J24

Suggested Citation

Ma, Song and Wang, Wenyu and Wu, Yufeng, Steering Labor Mobility Through Innovation (December 28, 2023). Fisher College of Business Working Paper No. 2023-03-029, Charles A. Dice Working Paper No. 2023-29, Available at SSRN: https://ssrn.com/abstract=4678261 or http://dx.doi.org/10.2139/ssrn.4678261

Song Ma

Yale School of Management ( email )

165 Whitney Ave
P.O. Box 208200
New Haven, CT 06511
United States

HOME PAGE: http://faculty.som.yale.edu/songma/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Wenyu Wang

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

Yufeng Wu (Contact Author)

Ohio State University (OSU) ( email )

812 Fisher Hall
2100 Neil Ave
Columbus, OH 43210
United States
43210 (Fax)

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