How do technological innovations affect corporate investment and hiring?
Date of Original Version
In this paper, we study the relation between technological advancement, and corporate investment and hiring. We build a corporate investment model with dynamic technology conditions, and we find the optimal investment and labor inputs increase in response to technological innovation shocks. Consistent with the model predictions, we empirically show that corporate investment and hiring increase following technological advancements, using various measures of technological innovation. Further, we find the effect is stronger for firms in more innovative industry, firms with higher capital intensity and firms with higher market-to-book ratio. Our findings provide evidence for the endogenous growth theory, i.e., firms with successful innovations tend to expand in capital investment and employment, suggesting technological innovations are, to some extent, Hicks-neutral.
Publication Title, e.g., Journal
North American Journal of Economics and Finance
Liu, Ying, Steve Liu, Ziqi Wu, and Yi Xiao. "How do technological innovations affect corporate investment and hiring?." North American Journal of Economics and Finance 62, (2022). doi: 10.1016/j.najef.2022.101759.