No 2015/3 Innovation and corporate employment growth revisited

Abstract

Using Norwegian Community Innovation Survey (CIS) data linked to public employment registers covering the years 2004 - 2010, this paper investigates the relationship between employment growth prior to the event of innovation, innovation output, and growth performance after the event. Positive growth ex ante generally strengthens growth ex post. Moreover, it increases the likelihood that innovations are introduced during the intermediate period that strengthen employment performances further. This effect is present for all levels of growth only when new products, production processes and support functions are introduced in tandem. Standalone improvements of products, by contrast, influence only the probability of survival, whereas standalone improvements of production processes and support functions support ex post growth specifically in the upper tail of the distribution. Our findings challenge the common view that product innovations are more important to growth than process innovations, and reveal interdependencies between multi-faceted organizational capabilities, innovation output and employment performance.