The effect of employee mobility on firm innovation

Abstract

We study the effect of employee mobility on firm innovation. Using an occupation-based measure of employee mobility, we find that firms with more mobile workforces are associated with greater patent quantity and quality and higher innovation efficiency. This effect is more pronounced for firms with higher labor intensity, greater business diversification, and lower unionization rates. Both the private market value of innovation and the effectiveness of innovation to generate revenues increase with higher employee mobility. Consistent results are found using a quasi-experimental shock, which helps address endogeneity concerns. Our findings suggest that employee mobility has a profound impact on innovation.