Discussion Paper Details

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Title: Teams and Bankruptcy

Author(s): Ramin P. Baghai, Rui C Silva and Luofu Ye

Publication Date: September 2018

Keyword(s): bankruptcy, creative destruction, Innovation, labor productivity, Team-specific human capital, Teams and Teamwork

Programme Area(s): Financial Economics and Labour Economics

Abstract: We study how the human capital embedded in teams is reallocated in corporate bankruptcies using data on US inventors. We find that bankruptcies reduce team stability. After a bankruptcy, team-dependent inventors produce fewer and less impactful patents. This points to the loss of team-specific human capital as a cost of resource reallocation through bankruptcy. However, this cost is limited by the ability of the labor market and the market for corporate control to preserve teams. Inventors with past collaboration are likely to move jointly to a new firm after bankruptcy, and the productivity of team inventors that relocate together increases.

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Bibliographic Reference

Baghai, R, Silva, R and Ye, L. 2018. 'Teams and Bankruptcy'. London, Centre for Economic Policy Research.