August 2021 Editor’s Choice

August 2021 Editor’s Choice: “The Local Innovation Spillovers of Listed Firms”

Exogenous shocks that reduce innovation by listed firms also reduce innovation by other firms in the same geographical area. The mechanism comes from local knowledge diffusion through two channels: inventors moving across firms or creating new start-ups. This implies that policies restricting worker mobility, such as non-compete covenants, can have large aggregate effects on innovation.