Paid Family Leave and Corporate Innovation

Abstract

I investigate the effect of labor market frictions for female employees on corporate innovation. Following the implementation of state-level paid family leave acts, which exogenously increase female talent allocation by facilitating labor market participation of female inventors, firms headquartered in affected states show significant increases in their innovation relative to unaffected firms. This effect is stronger for firms in innovative industries, for firms with a skilled workforce, for firms in industries with lower labor mobility, for firms in less competitive local labor markets, and for firms with lower female employment. Overall, my results imply that labor market frictions for working mothers inhibit corporate innovation.