Journal of Financial and Quantitative Analysis Vol. 61 No. 1 2026

Local Labor Markets and Corporate Innovation

Cheng Jiang¹; Kose John²; Kyeong Hun Lee³; Emma Qianying Xu⁴

¹ Boston College Carroll School of Management · ² New York University – Stern School of Business · ³ University of Alabama Culverhouse College of Business · ⁴ University of Memphis Fogelman College of Business and Economics

Abstract

We construct a measure ( fLMA ) of the extent to which neighboring firms hire similar types of workers, based on the similarity between the labor profile of a firm and that of its locality. We show that a firm’s innovation is positively related to fLMA. The enhanced labor mobility induced by higher fLMA is an important channel for this positive relation. This relation is stronger when firms have increased outside job opportunities for employees, increased knowledge spillovers via coworkership, and more employee stock options. Innovation is higher when intellectual property ownership is with employers, not employees. This effect increases in fLMA.

DOI

10.1017/s0022109025000158

Volume

61

Issue

1

Pages

441-479

Language

en

Sources

openalex crossref

Cite

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