Working Paper: NBER ID: w25360
Authors: Tania Babina; Sabrina T. Howell
Abstract: This paper studies how corporate research and development (R&D) investment affects labor mobility. We use employer-employee matched data in ordinary least squares and instrumental variables analyses to assess four hypotheses. R&D has no effect on worker retention, exit from employment, or mobility to incumbent firms. Instead, it increases employee departures to entrepreneurship, leading employees to join the founding teams of startups that are venture capital-backed, high tech, high wage, and in different sectors than the parent firm. These high-growth, high-risk startups emerging from R&D benefit from a focused, standalone incentive structure and have poor complementarities to the parent firm’s assets.
Keywords: Corporate R&D; Labor Mobility; Entrepreneurship; Employee Departures
JEL Codes: G30; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Corporate R&D spending (O32) | Employee departures to entrepreneurship (L26) |
| Corporate R&D spending (O32) | Employee retention (M51) |
| Corporate R&D spending (O32) | Employee mobility to other incumbent firms (J62) |
| R&D increases (O39) | Entrepreneurial outcomes (L26) |
| Changes in state and federal R&D tax credits (O39) | Corporate R&D spending (O32) |