Firing Costs and Inventor Turnover

Article Information
Journal: Business and Economics Research Journal
Title of Article: Firing Costs and Inventor Turnover
Author(s): Emre Ekinci
Volume: 14
Number: 2
Year: 2023
Page: 141-155
ISSN: 2619-9491
DOI Number: 10.20409/berj.2023.409
This paper examines the effect of firing costs on inventor turnover using the patent data provided by the United States Patent and Trademark Office (USPTO) for the 1975-2003 period. The adoption of the wrongful discharge laws in the US is considered as an exogenous increase in firing costs. As states adopt these laws at different dates, a quasi-experimental setting allows us to estimate a casual effect. Using the existing holdup theories investigating the employment relationship, we conjecture that the effect of firing costs on inventor turnover hinges on the extent to which the inventor’s knowledge set is transferable to competing firms. We measure knowledge transferability by the number of co-authors an inventor has filed a patent with, his or her specialization across technological classes and reliance on the prior art patented by the current employer. Our analysis shows that these variables alter, as predicted by the theory, how increased firing costs affect inventor turnover.

Keywords: Patents, Innovation, Wrongful Discharge Laws, Firing Costs, Worker Turnover

JEL Classification: J24, K31, M55, O31 Full Text