Labor Force Demographics and Corporate Innovation

Firms in younger labor markets produce more innovation. We establish this by instrumenting the current labor force with historical births in each local labor market in the United States. Analyses of firms and inventors allow us to rule out unobservable heterogeneity across local labor markets and firms, life cycles, and other effects. Corporate innovation in younger labor markets reflects the innovative characteristics of younger labor forces, and its market value is higher. Younger workers as a group, not merely inventors by themselves, produce more innovation for firms through the labor force channel rather than through a financing or consumption channel.

Keywords: Innovation; Demographics; Labor markets; Inventors; Firm value

JEL Classification: G31, J11, J21, O31

Suggested Citation: Suggested Citation

Derrien, François and Kecskes, Ambrus and Nguyen, Phuong-Anh, Labor Force Demographics and Corporate Innovation (October 18, 2022). HEC Paris Research Paper No. FIN-2017-1243, Review of Financial Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3076971 or http://dx.doi.org/10.2139/ssrn.3076971