Non-technical innovation

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• Non-technical innovation
• Definition, Measurement Policy Implications
• Workshop
• Karlsruhe, 16-17 October 2008
• The employment impact of technological and
  organizational innovations. Firm level evidence
• Rinaldo Evangelista Antonio
  Vezzani
• University of Camerino (IT) University of Rome
  Tor Vergata

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Structure of the presentation

• State of the art and motivation of the empirical
  study
• Issues addressed and methodology
• Results (preliminary)
• Synthesis of results and conclusions

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The debate on the innovation-employment
relationship an never ending story with no
conclusive answers

• Very complex issue which can be tackled from
  different perspectives and levels of the analysis
  
• previous works and reviews (largely referring to
  the manufacturing sector) show that it is
  impossible to come-up with a final answer
• results depend very much on the level of
  aggregation, type of data, time framework
• very difficult to grasp the net aggregate effect
  (i.e. grasp all direct and indirect effects at a
  macro-economic level)
•  
• different contributions and analyses should be
  used in a complementary way in order to assemble
  a meaningful interpretative puzzle

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First fundamental question Why making a specific
analysis on services?   Two possible
answers   a) under-explored area -gt lack of
evidences and empirical studies (certainly
true)   b) specificity of both innovation
the innovation-employment relationships
(open issue.. to be explored empirically).
Three broad issues in the research agenda  
a) What we have learnt from the manufacturing
industry does also apply to services?   b)
Should we change our approach and look at
different dimensions, mechanisms, effects?  
c) Go for a synthesis approach?
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Empirical issues addressed in the paper   1. How
do product, process and organizational changes
relate to each other (level and type of
complementarity)?   a) Do emerge distinct
patters and strategies made of different
combinations of product/process/organization
al changes? b) Does organizational innovation
represent a stand-alone strategy or it is
linked to a product or process innovation
strategy?  c) Are there systematic
differences between manufacturing and services
industries in a) and b) above? 2. The
effects on employment   a) What are the
(direct and indirect) effects of product, process
and organizational innovation on employment in
Services? b) Is the product/process
distinction effective in disentangling the
different mechanisms and effects of innovation
on employment in the Service sector?
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Methodology

• Data Italian CIS4 (2002-2004) - Manufacturing
  Services (comparative analysis)
• Firm level analysis
• Main CIS variables used
• - Type of innovation (product/process/organizati
  onal/marketing)
• - Effects of tech non-tech innovation (product
  vs process related)
• - Type of innov. input output (innov.
  expenditures and innov. sales)
• - Employment growth (2002-2004)
• - Sales growth (2002-2004)

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Main caveats of CIS (and of this study)

• vary basic information/types of organizational
  innovations
• cross sectional nature of data and analyses
• difficulty of grasping the aggregate-net effects
  of innovation firm level evidence cannot be
  generalized at a macro level
• no possibility of investigating qualitative
  effects on employment

• Major strengths
• Data representative of all manufacturing and
  service sectors (across EU)
• Possibility of combining non-technological with
  technological innovations

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Relevance of ( complementarity between)
technological and non-tech. innovations
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Innovation modes results from a cluster analysis
Sectoral characterization of innovation modes
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Effects of technological innovation (CIS4)
How important were each of the following effects
of your product (good or service) and process
innovations introduced during the three years
2002 to 2004 (scores from 0 to 3)?

• Increased range of good or services
• Entered new markets or increased market share
• Improved flexibility of production or service
  provision
• Reduced labour costs per unit output
• Reduced materials and energy per unit output

Product related
Process related
The importance of product and process related
effects has been computed as average values of
the scores attached to each set of answers.
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Effects of non technological innovation (CIS4)
If your enterprise introduced an organisational
innovation during the three years 2002 to 2004,
how important were each of the following effects
(scores from 0 to 3)?

• Reduced time to respond to customer or supplier
  needs
• Improved quality of your goods or services
• Reduced costs per unit output
• Improved employee satisfaction
• and/or reduced rates of employee turnover

Product related
Process related
Job satisfaction
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Innovation profiles of different clusters (probit
estimates) Manuf. Services
significant at 5 significant at 1 -
Marginal effects are reported in table
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Innovation profiles of different clusters (probit
estimates) - Services
significant at 5 significant at 1 -
Marginal effects are reported in table
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The employment impact of innovation at a firm
level
Organisational
Direct effects
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The model
Labour effects equation
Economic performance equation
?Lit rate of change of employment
(2002-2004) ?Yit rate of change of turnover
(2002-2004) Lt-1 employment in 2002 pt-1
productivity in 2002 Proc dummy for process
innovation Org dummy for organisational
innovation Herf Herfindahl concentration index
(for 2-digit level) Dem Uncertain demand for
innovative goods or services

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Estimation strategy

• Three-stage least square estimation
• 1th Develops instrumented values for all
  endogenous variables
• (In our system ?Lit and ?Yit)
• 2nd Obtains consistent estimates for the
  covariance matrix of the
• equation disturbances
• 3rd Performs a GLS-type estimation using the
  covariance matrix
• estimated in the second stage and with the
  instrumented
• values in place of the right-hand-side
  endogenous variables
• (In this case ?Yit)

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The employment impact of innovation estimation
results
significant at 10 significant at 5
significant at 1 Industry dummies are included
in both ?L equations, corresponding effects are
not shown,but Ind_dummies reports the p-value of
a test of the joint significance.
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Synthesis of results

• Relevance (and complementarity between) product,
  process and organizational innovations
•  
• Even when non-technological-innovation are
  brought into the picture, the product/process
  distinction is still effective in identifying
  different innovation strategies and performances.
  This holds both in the manufacturing and service
  sectors.
• Nonetheless, our analysis has shown the presence
  of a distinct pure organizational innovation
  mode particularly relevant in Services
• Our analysis has also identified two different
  product-driven innovation modes - one simply
  based on the mere introduction of product
  innovation
• - a more complex and innovative one, made
  of a combination of
• different and complementary types of
  innovation (product, process and
  organizational)

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• 2. The employment impact of innovation (synthesis
  of results)
• No negative (labour displacing) direct effects of
  innovation on employment have been found in both
  manufacturing and service industries.
• In both sectors innovation exerts its impact on
  employment in an indirect way, that is improving
  the competitive performances of firms (growth of
  sales and gain of market shares)
• Product related strategies (when complemented
  with the introduction of both process and
  organizational innovations) show the strongest
  employment impact (via improved economic
  performances) in both Manufacturing and Services.
   
• The employment impact of process innovation is
  positive only in the Manufacturing sector. This
  indicates that only in this sector productivity
  gains can be obtained through pure process
  innovation strategies.
• -gt This implies that in the case of services,
  pure technology based innovations are less
  effective and efficiency gains (and employment
  growth) are likely to be associated to more
  complex (technological and organizational)
  innovation mix.
• The product/process distinction, although very
  relevant, does not capture all types of
  innovation strategies and their different effects
  on employment.
• The introduction of stand-alone organizational
  changes emerges as an effective innovation
  strategy for a relatively large section of firms.
  
• Surprisingly enough, the strongest (positive)
  employment impact of this type of innovation is
  found in the manufacturing sector.

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Some implications
All in all the evidence presented provides
further support to a synthesis approach and
suggests that such an approach should be extended
also to the analysis of the relationships between
innovation (economic performances) and
employment. This is not an easy task though, both
on a conceptual and on an empirical ground
While concepts, definition and data-set on
firms technological activities are rather
settled and widely available, the same does not
apply to organizational innovation Future
advancements in this research area (as well as
any attempt of overcoming a sterile
manufacturing/services divide) will crucially
depend on the extent to which this type of
asymmetry will be overcome, and on the
possibility of integrating robust and meaningful
data on both technological and organizational
innovation