We study the relationship between the turnover of a class of highly specialized labor and firm value. We find that the net flow of inventors can positively predict stock returns in the following year, even after controlling for the current and future value of other variables that capture innovation activities. Companies that hire more inventors also increase other related investments, such as capital expenditure and research and development (R&D) expenditure. We show that larger innovative labor input is accompanied by better future output and more original research, and the return predictive power persists for a few years.

Working paper

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