Team-Specific Capital and Innovation

Working Paper (with Neviana Petkova and Alex Bell). Revise and Resubmit, American Economic Review.

We show that team-specific capital is important for the typical patent inventor's lifecycle earnings and productivity. Using administrative tax and patent data for the population of US patent inventors from 1996 to 2012 and employing a difference-in-differences research design based on the premature deaths of 4,714 inventors, we establish that an inventor's premature death causes a large and long-lasting decline in their co-inventor's earnings and citation-weighted patents (-4% and - 15% after 8 years, respectively). We rule out firm disruption, network effects and top-down spillovers as primary drivers of this result. Consistent with the team-specific capital interpretation, the effect is larger for more closely-knit teams and primarily applies to co-invention activities with the deceased.