Hire, Fire, or Train: Innovation and Human Capital Responses to Recessions
| Lasse Lien |
This is admittedly a shameless attempt to increase my human capital — by promoting the paper with the title above. The paper is joint work with Eirik S. Knudsen, and it is recently out in SEJ.
Abstract: We examine how firms’ relative emphasis on exploration and exploitation influence their human capital responses to recessions. We hypothesize and find that the higher the focus on exploration, the more firms invest in training, the more likely they are to hire, and the more likely they are to lay off employees during a recession. Finally, we also find that exploration-oriented firms are more likely to combine the accumulation of human capital through training, with both hiring and firing. This indicates that firms focusing on exploration more actively pursue the opportunities created by increased labor market imperfections during recessions. These results contribute to the literature by highlighting how recessions affect firms’ flow of human capital investments, and subsequently stocks, depending on their strategic orientations.
The full paper can be found here.