Technological innovation and the demand for labor by firms in expansion and recession

With firm data from the Spanish Community Innovation Survey (CIS) for the period 2003-2014, we find a positive and significant effect of innovation in the demand for labor when firms introduce product and process innovations in the same time period. The effect of innovation on the demand for labor i...

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Bibliographic Details
Published in:Economics of innovation and new technology 2020-05, Vol.29 (4), p.417-440
Main Authors: Ortiz, Javier, Salas Fumás, Vicente
Format: Article
Language:English
Subjects:
business cycle
Companies
Competition
Demand
demand for labor
Employment
Innovations
Labor
Longitudinal studies
Product and process innovations
Recession
Recessions
Spanish CIS panel data
Technological change
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Summary:With firm data from the Spanish Community Innovation Survey (CIS) for the period 2003-2014, we find a positive and significant effect of innovation in the demand for labor when firms introduce product and process innovations in the same time period. The effect of innovation on the demand for labor is countercyclical, higher in the recession, after 2008, than in the expansion, before 2008, but the probability that firms innovate in product and process is counter-cyclical, i.e. lower in the recession. Altogether, the elasticity of the demand for labor to the probability that firms introduce product and process innovations remains stable throughout the sample period, at around 0.035. Innovation contributes to stabilize average employment during the cycle, more so when the innovation is in product, alone or together with process, than when it is only in process. These results are broadly consistent with product and process innovations shifting firms' demand and production functions upwards, but differentially in expansions (less product market competition) than in contractions (more competition).
ISSN:1043-8599
1476-8364
DOI:10.1080/10438599.2019.1629535