The ability to invent is central to many firms, yet maintaining R&D teams turns
out to be quite difficult. We document sizeable churn of R&D workers between firms,
as well as within a firm to and from R&D. The R&D team in for-profit firms experience
an 8% decrease in size the year after loss of a team member through death,
with the effect increasing to 25% six years later . The firm loses additional R&D team
members after this event through departures, but does not increase hiring. Transfers
of additional individuals from non-R&D jobs into the R&D team decreases and the
probability of transfers in the opposite direction increases as a response to death in the
R&D team, as does the probability of team members leaving the firm. Finally, firms
do not adjust R&D workers’ wages as a response. Overall, profit-making firms appear
unable to adjust to unexpected losses of personnel in R&D team, hence suffering long
term consequences in innovativeness.