Bankruptcy, team-specific human capital, and innovation: evidence from U.S. inventors

Finance

Social Sciences Research Network

2017

We study the impact of corporate bankruptcies on the career and productivity of inventors in the United States. We find that the quality of patents produced by inventors decreases post-bankruptcy; this effect is exacerbated when inventor teams are dissolved during bankruptcy. Furthermore, workers affected by team dissolution are less likely to remain active as inventors. When, instead, inventor teams remain intact and jointly move to a new firm, their post-bankruptcy productivity increases. Consistent with the labor market recognizing the value of team stability, the probability of joint inventor relocation after bankruptcy is positively associated with past collaboration. Our findings highlight the important role of team-specific human capital and team stability for the production of knowledge in the economy, and shed light on the microeconomic channels through which the process of “creative destruction” operates.

Team-specific human capital; Innovation; Bankruptcy,; Creative destruction; Inventor productivity

Swedish House of Finance Research Paper no. 17-19

Social Sciences Research Network

No

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