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Skilled Immigration, R&D Concentration, and Industry Consolidation

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  • Rajesh K Aggarwal
  • Mufaddal Baxamusa

Abstract

We demonstrate a novel link between skilled immigration restrictions, corporate innovation, and industry consolidation. Binding restrictions on H1B visas are a shock to firms’ R&D labor supply, leading firms to shift R&D expenditures and employees overseas. Organizationally and financially constrained firms are less able to adjust to the restrictions. They reduce basic research and patenting, are less able to acquire other firms for intellectual property, and are more likely to exit. Industry concentration and firm-level markups increase when firms are better able to adjust. This increase in market power is an unintended consequence of skilled immigration restrictions.

Suggested Citation

  • Rajesh K Aggarwal & Mufaddal Baxamusa, 2024. "Skilled Immigration, R&D Concentration, and Industry Consolidation," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 13(4), pages 966-998.
    • Handle: RePEc:oup:rcorpf:v:13:y:2024:i:4:p:966-998.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfae003
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    More about this item

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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