Where Have All the "Creative Talents" Gone? Employment Dynamics of US Inventors
How are inventors allocated in the US economy and does that allocation affect innovative capacity? To answer these questions, we first build a model of creative destruction where an inventor with a new idea has the possibility to work for an entrant or incumbent firm. If the inventor works for the entrant the innovation is implemented and the entrant displaces the incumbent firm. Strategic considerations encourage the incumbent to hire the inventor, offering higher wages, and then not implement the inventor's idea. To test this prediction, we combine data on the employment history of over 760 thousand U.S. inventors with information on jobs from the Longitudinal Employer-Household Dynamics (LEHD) Program at the U.S. Census Bureau. Our results show that (i) inventors are increasingly concentrated in large incumbents, less likely to work for young firms, and less likely to become entrepreneurs, and (ii) when an inventor is hired by an incumbent, compared to a young firm, their earnings increases by 12.6 percent and their innovative output declines by 6 to 11 percent. We also show that these patterns are robust and not driven by life cycle effects or occupational composition effects.
Any opinions and conclusions expressed herein are those of the authors and do not represent the views of the U.S. Census Bureau. The Census Bureau has reviewed this data product for unauthorized disclosure of confidential information and has approved the disclosure avoidance practices applied to this release. We thank John Haltiwanger, Joseph Staudt, Shawn Klimek, participants at the 2022 Research Data Center Annual Conference and USPTO Chief Economist Seminar for helpful comments and suggestions. Zeki Berkay Saygin and Craig Chikis provided excellent research assistance. DRB Approval Number(s): CBDRB-FY20-CES007-004, CBDRB-FY21-CES007-004, CBDRB-FY22-CES008-008, CBRDB-FY23-CES020-001, CBRDB-FY23-CES020-002. DMS Project Number 7083300. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- Many analyses of economic growth have focused on presumably relevant ratios in the innovation pipeline, such as research and development...