Inventor Mobility, Knowledge Diffusion, and Growth

This paper examines a labor market in which inventors and firms interact, and its implications for the allocation of inventors across firms, knowledge diffusion, and productivity growth. We build an endogenous growth model that incorporates a frictional inventor market. In this model, inventors play dual roles: they engage in in-house R&D and transfer knowledge from previous employers to new ones when changing jobs. Using an administrative panel dataset on German inventors matched to their employing establishments and patent, we find that, compared to general workers, inventors tend to transition to less productive establishments and suffer a smaller wage decrease via the transition. We also find that the knowledge base of establishments grows faster when a more significant proportion of their inventors originates from more productive establishments. We then calibrate the model to reflect these empirical findings and examine the effects of innovation policy. While subsidies provided to technologically lagging firms encourage knowledge diffusion to these firms from frontier firms, these subsidies also discourage innovation within frontier firms. The former positive effect dominates in the short term, but the latter negative effect dominates in the long run