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Local Labor Markets and Corporate Innovation
Published online by Cambridge University Press: 04 July 2025
Abstract
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We construct a measure (fLMA) of the extent to which neighboring firms hire similar types of workers, based on the similarity between the labor profile of a firm and that of its locality. We show that a firm’s innovation is positively related to fLMA. The enhanced labor mobility induced by higher fLMA is an important channel for this positive relation. This relation is stronger when firms have increased outside job opportunities for employees, increased knowledge spillovers via coworkership, and more employee stock options. Innovation is higher when intellectual property ownership is with employers, not employees. This effect increases in fLMA.
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This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (http://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.- Copyright
- © The Author(s), 2025. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington
Footnotes
We are grateful to Jarrad Harford (the editor) and an anonymous referee. We thank Anup Agrawal, Jack He, Lei Kong, Ron Masulis, Avri Ravid, Tony Saunders, Fabian Slonimczyk, and Cihan Uzmanoglu, and conference and seminar participants at the 2021 AFA, 2019 CFEA at NYU, 2021 CICF, 2020 FMA, University of Alabama, Higher School of Economics ICEF, Kent State University, University of New Mexico, Suffolk University, and University of Washington Bothell for helpful comments and suggestions.
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