How Does Patent System Affect on Firm’s R&D Investments and Industry Labor Mobility

In the modern literature R&D investments and industry’s labor mobility interdependency are not confirmed unambiguously. There are theoretical and empirical evidence for both positive and negative relations. In this work industry’s patent system is suggested as an additional factor. It is presented with two-period model of competitive high-tech industry where a hired worker acquires private knowledge that under low information security may contribute to knowledge spillover. Solving the model, we discovered that information security increase provokes additional R&D investments in case of bad patent system. It is explained by higher returns from investments. Otherwise, a firm has incentives to redistribute expenditures into patent from R&D. Thus, we can observe positive and negative interdependency between labor mobility and R&D investments at the same time. It explains absent consensus about this interdependency in literature.