How Does Publicly Available Knowledge Affect Interfirm Hiring?
43 Pages Posted: 7 Jan 2025
Abstract
Increased availability of codified public knowledge may diminish the need to hire inventors who possess such knowledge. However, effectively utilizing codified knowledge requires tacit knowledge embedded in inventors and may drive up the demand for inventors who possess tacit knowledge. With both substitutive and complementary mechanisms at play, the direction of the impact depends on the nature of inventors’ knowledge, which is gained through performing complex inventive tasks. Our study investigates this dynamic using the enactment of the American Inventors Protection Act (AIPA), which increased publicly available knowledge through mandated patent disclosure, as a quasi-natural experiment. We find that firms with greater exposure to AIPA hire fewer inventors with low levels of tacit knowledge, while increasing the hiring of inventors with highly tacit knowledge. Further analyses reveal that both the substitutive and complementary effects are less pronounced for firms with highly novel knowledge bases, but they are more pronounced for firms with strong absorptive capacity. This indicates that superior capabilities facilitate firms in capitalizing on environmental changes, whereas unique resources may impose constraints. This study examines the impact of information environment on interfirm hiring strategies, highlighting the nuanced interplay between codified and tacit knowledge and offering strategic insights for navigating an era of information abundance.
Keywords: tacit knowledge, interfirm hiring, knowledge-based view, complexity, American Inventors Protection Act (AIPA)
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