Does Government-Biased Talent Allocation Hinder Innovation? Evidence from China

This paper examines the relationship between talent allocation pattern and innovation in China. We use census data from 2005, 2010, and 2015 to estimate the concentration of talent in government departments at city level, representing the pattern of talent allocation. We find that the current talent allocation pattern negatively impacts corporate innovation. A one standard deviation increase in government talent concentration leads to 3.1% decrease in the average number of patent applications by industrial enterprises within the jurisdiction over the following three years. This negative effect is primarily driven by non-state-owned enterprises and small and medium-sized enterprises. The government-biased talent allocation pattern results in lower quality of R&D personnel in enterprises. Additionally, government departments with higher talent concentration have stronger tax collection abilities, leading to an increased real tax burden on enterprises and crowding out R&D expenditure, while failing to provide effective support for corporate innovation through public goods provision.