Spin-offs and spillovers: Tracing knowledge by following employees across firms

Most R&D projects fail from a commercial point of view, and technological shifts may quickly turn even successful innovations into failure. It is, however, possible that projects which fail commercially produce knowledge with some social value. Such knowledge is likely to be embodied in workers or teams of workers, and in order to evaluate the social returns to research, it is desirable to trace workers as they move across firms and industries. In this paper I utilize a large matched employer-employee data set and test for the existence of potential knowledge spillovers transmitted through the labor market. The specific case analysed is a series of Norwegian IT-programs so far considered unsuccessful, but which recently have been linked to the rise of a new generation of successful IT-firms. It has been argued that know-how and networks built up in leading companies during the programs still ‘fertilize’ the Norwegian IT-industry. I find little support for this claim. Workers with experience from companies that received R&D subsidies were largely re-employed in IT-industries, but they have not outperformed similar workers without such experience. An analysis of firms that are spin-offs from formerly subsidized IT-firms reveals that they perform below, rather than above average. JEL classification: J24, J31, J62, O32