Public-Sector Employment Pressure and Corporate Innovation: Evidence from Civil-Service Recruitment Selectivity in China

How does competition for scarce public-sector jobs affect private-sector innovation? We combine position-level records from China’s National Civil Service Examination—including recruitment quotas and minimum interview cutoff scores—with annual data on Shanghai- and Shenzhen-listed A-share firms to construct a matched city–firm panel. A model of endogenous application, rank-order selection, and firm talent allocation shows that, with public vacancies fixed, greater employment pressure expands the applicant pool and raises the selection cutoff. This process creates a larger and more able pool of qualified-but-not-hired candidates. When the marginal productivity gain from talent quality exceeds the cost of adjusting positions, firms raise both their R&D staffing share and R&D intensity. In the high-confidence 2018–2024 sample, a one-standard-deviation increase in civil-service selectivity is associated with 5.1% more patent applications, 5.0% more invention-patent grants, and a 0.212-percentage-point increase in R&D intensity. Firms also increase cash payments to and on behalf of employees, the share of R&D employees, and the share of employees with doctoral degrees. The effects are stronger among firms with greater pre-period dependence on R&D talent and in cities with a larger pre-period public-job supply. A battery of robustness checks preserves the baseline pattern. In instrumental-variable specifications, the estimates remain positive across all three outcomes and are statistically precise for invention-patent grants. The evidence suggests that competitive public-sector recruitment need not merely siphon talent from firms: through selection, signaling, and the re-entry of qualified but unsuccessful candidates, it may also promote innovation-oriented human-capital reallocation in the firm sector.