Does Human Capital Homogeneously Improve the Corporate Innovation: Evidence from China’s Higher Education Expansion in the Late 1990s

Abstract

The effect of human capital on corporate innovation varies with the distribution of human capital intensity among industries. To analyze this heterogenous effect, we utilized the variation of college enrollment expansion across different regions in China as an exogenous human capital shock. Using a sample of Chinese industrial enterprises from 1998 to 2008 and the difference-in-difference strategy, we found that industries with intensive human capital significantly increase the number of patent applications after the expansion policy. The effect is pronounced in invention patents and significantly positive in exporting and capital-intensive corporates. As for the channels, corporates in these industries are apt to adopt new technologies and increase R&D expenditures. Moreover, the agglomeration of new graduates accelerates knowledge spillover, thus promoting innovation in knowledge-intensive industries. In sum, this paper verifies the importance of policy intervention on skilled labor supply towards corporate innovation and supports the talent introduction plan of local government in China.