From Employee Mobility to Aggregate Growth
The subject here is the economy-wide system created by innovating spinouts: skilled workers choose between employment and entrepreneurship, firms differ in their ability to turn R&D into innovation, and departures change both entrant quality and parent capacity. The specific problem is that firm-level findings cannot by themselves tell us how these choices add up to growth. A calibrated equilibrium model supplies that missing connection, allowing us to see why startup quality is endogenous and why the same mobility can help new firms while weakening incumbents.
Why a model is needed
The evidence already establishes several relationships. Spinouts are unusually innovative and persistent. Parent technological leadership predicts the quality of the firms that leave. Corporate R&D increases employee spawning in the studied margin. An inventor’s departure can temporarily reduce the parent’s innovation. These findings do not add together mechanically, because each changes the conditions under which the others occur.
More spinouts do not simply add an equal number of firms to a fixed economy. They may replace incumbent firms through creative destruction, draw skilled people away from R&D jobs, change the distribution of high- and low-quality firms, and alter the incentives of parents that anticipate future departures. A parent’s innovation loss may reduce the supply of future high-quality opportunities, while a successful new firm may create competition that pushes other firms to improve. The sign and size of the aggregate result depend on these feedbacks.
The model addresses that problem by making the key actors and transitions explicit. It is a Schumpeterian growth model, meaning that innovation and entry continually displace less productive firms and move the economy up a technology ladder. The purpose is not to reproduce every detail of a startup’s life. It is to retain the few relationships needed to connect worker mobility to firm composition and long-run growth.
The first actor is skilled labor. A skilled person can operate a firm as an entrepreneur, work for an incumbent as an R&D manager, or remain outside while deciding between those paths. These choices are connected. If entrepreneurship becomes more attractive, fewer skilled people may be available to manage incumbent research. If firms offer higher wages to retain valuable managers, the cost of founding a spinout rises in practice even without a legal restriction. If the expected value of a new venture increases, more outsiders may attempt regular entry.
The second actor is the firm. Each firm has a permanent quality type: high-type firms are more efficient at converting R&D resources into innovation, while low-type firms are less efficient. A firm also has a position on a technology ladder, represented by its technological gap relative to the competitive frontier. As it innovates, it moves upward and earns more from being ahead. As other firms enter or innovate, that lead can shrink or disappear.
This distinction between type and position matters. Type is a persistent capability that is largely determined at entry in the model. Position is the firm’s current technological lead, which can change through subsequent innovation and competition. A high-type firm may climb the ladder faster, but a low-type firm can still occupy a valuable position for a time.