Is innovation driving employment growth?

Does innovation cause employment loses?

Using a panel of around 10.000 firms over the 2004-2013 period from the PITEC database, it is observed that employment is affected by the great recession experiencing a downturn. Concentrating on the dynamic behaviour of employment and if and how it reacts to innovation in firms, two alternative econometric estimations support the positive and significant impact of innovation on employment, both for product and process innovation. Employment in R&D follows a similar pattern, but, as expected, is much more sensible to the innovation variables. Our estimates also report that the growth of sales due to the introduction of new products is followed by an increase of net employment in firms. Contrary to the samples in other countries, we do not observe that the innovation process is causing employment loses.

Is this relationship different in the crisis? 

Dividing our sample by subperiods, in order to investigate the impact of the Great Recession on this relationship, we conclude that firms that made process innovations created more (or less destroyed) jobs during the recession period. The policy implications of our findings confirm that innovation policies are not against employment creation. They should be persistent over time.


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