Publication Type

Journal Article

Version

submittedVersion

Publication Date

6-2026

Abstract

We examine whether the largest place-based, firm-specific corporate subsidies (“Megadeals”) awarded by state and local governments affect local firms’ innovation. First, we document that 1) subsidy firms innovate in the subsidized county and 2) subsidy firms bring inventors from other counties into the subsidized county, consistent with subsidy firms generating new knowledge locally. In our main test, we use a stacked cohort design with stringent fixed effects to document that local firms increase patenting following a Megadeal. Cross-sectionally, effects are increasing 1) in subsidy firm innovativeness, 2) in the technological closeness of subsidy firms and local firms, 3) when subsidy and local firms share an industry and 4) when the subsidized location has a heavy college presence. Additionally, we document that following a Megadeal, local firms increasingly make citations to subsidy firm patents and that the patent similarity of local and subsidy firms increases. We document that subsidy firm inventors are more likely to move to local firms following a Megadeal. We also find that subsidies for labs, headquarters and high-tech manufacturing plants drive our main results. These results are consistent with knowledge spillovers being one channel through which we observe an increase in local firm patenting following Megadeals.

Keywords

Corporate subsidies, corporate innovation, knowledge spillover

Discipline

Accounting | Industrial Organization | Public Economics

Research Areas

Corporate Reporting and Disclosure

Areas of Excellence

Digital transformation

Publication

Journal of Accounting Research

First Page

1

Last Page

104

ISSN

0021-8456

Publisher

Wiley

Embargo Period

7-7-2026

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