Jiayi Bao, Applied Economics, The Wharton School
Abstract: The management view of human capital as a source of sustained competitive advantage has driven research on how strategic human resource practices affect organizational performance. This paper focuses on how a firm’s time-off policy can be a source of competitive advantage in entrepreneurial settings, particularly for innovation. Three types of employee time-off are examined: job-protected unpaid leave, state-funded family leave, and firm-funded paid vacation. Exploiting state-to-state variation in eligibility thresholds, I adopt a regression discontinuity design to estimate the effect of state-mandated job-protected unpaid leave on patent and intellectual property ownership. I then estimate the effect due to state-funded paid family leave through a difference-in-difference estimation using a natural experiment. Finally, the effect of employer-funded paid vacation is evaluated with a fixed effects approach as well as an instrumental variable estimation. I find that job-protected unpaid leave has limited impact on innovation, at most via the intensive margin, supporting the 1-to-N innovation. Both state-funded family leave and firm-funded paid vacation have positive effects on innovation, especially via the extensive margin, contributing to the 0-to-1 innovation.