ESG Controversies and Inventor Job-Hopping

Abstract We find that ESG controversies significantly increase the likelihood that inventors seek employment elsewhere, primarily driven by misalignment with their prosocial motivations and heightened concerns about their career prospects. Supporting the Misalignment Channel, the effect of ESG controversies on inventors’ job-hopping is more pronounced for inventors located in states with high social capital and for those working in firms that emphasize an integrity culture. Consistent with the Career Concern Channel, the effect is also stronger for firms that are less attentive to employee career development and for those more vulnerable to ESG controversies. Moreover, the impact is amplified during periods of low unemployment and among more experienced inventors. Beyond job-hopping, we show that ESG controversies reduce firms’ innovative productivity, and that departing inventors tend to join firms with stronger ESG profiles. Our findings are robust to both difference-in-differences and instrumental variable two-stage least squares analyses. Overall, this study provides novel evidence on the real impact of ESG controversies on critical human capital, demonstrating that ethical lapses undermine both workforce stability and innovation output.