Filling the Gap - Firm Strategies for Human Capital Loss

This paper explores how the premature death of an inventor affects the productivity and career trajectories of co-inventors. To this end, we develop and analyze a dataset covering the careers of 152,350 German inventors. The data combine highly precise employer-employee data from official social security registers with patent office information covering the period from 1980-2014. Departing from 799 registered premature deaths of inventors and the same number of matched inventors, we study how co-inventors were affected by the death of their peers. Using a difference-in-differences and an event study design, we investigate the reaction of the co-inventors' patenting activities, career advancement and job mobility. Using a number of measures and robustness checks, our results show that the premature death of a co-inventor reduces the productivity of the surviving co-inventors. The effect sets in immediately and survivors do not seem to recover from the shock in the five years following. We argue that employers will seek to retain co-inventors under certain conditions in order to continue lines of research and invention. The empirical results confirm our expectations: surviving inventors are significantly less likely to move to a different employer and are more likely to be promoted compared to inventors in the control group. These effects seem to diminish after about two years."