Innovation and Employment in Spanish Manufacturing Firms

By , GRIPICO - Universidad Complutense de Madrid

The classical question “Does technology create or destroy jobs?” has been posed since the beginning of classical economics (Bogliacino and Vivarelli, 2010), and in well-defined contexts (Pianta, 2005). The analysis of the relationship between innovation and employment is complex, and in recent years, it has expanded to include new aspects like the level of employment skill, and new contexts like developing countries and the service sector. For many economists, it is essential to measure the impact of innovation on employment because of the fear of unemployment which arises in radical periods of technological change (Vivarelli, 2007, Bogliacino and Vivarelli, 2010, Vivarelli, 2012). As such, an evaluation of the effects of innovation on employment is important in order to understand how the product market and the institutionality of the job market can be affected by innovations in firms, and consequently, the impact of innovation policies on employment.

To address this problem, we must distinguish between different innovations promoted by firms and their influence on employment via multiple channels.  In general, the literature identifies four kinds of innovations, process, product, marketing and organisational, focusing the discussion on the first two, which are considered technological innovations.

The goal of the study is to discover the impact of technological innovations on employment in Spanish firms in the context of economic growth and recession, following the methodology developed by Harrison, Jaumandreu, Mairesse and Peters (2008). This model, which from here on will be called the HJMP model (2008), is used in most of the emprical research papers produced with firms’ micro-data. Information from the Panel of Technological Innovation is used for firms in the Spanish manufacturing sector from 2004 to 2010.

Given the chance to use data which cover a large range of years, including those when the Spanish economy grew considerably and also when that growth declined, we identify different effects of process and product innovation in Spanish firms. Not only are there changes in the magnitude of the impact of product innovation on employment, but also the production of old products loses efficiency during the period studied.

This paper is organised as follows. In Section II, the main theoretical relationships between innovation and employment are analysed from a microeconomic perspective.  In Section III, the HJMP model (2008) is reviewed and the main empirical results found in previous articles that use this model are summarised, for both developed and developing countries.  In Section IV, the estimation strategy and the implications of using panel data are set out in detail.  Section V describes the behaviour of the model’s main variables. Section VI presents the main results, closing with an assessment of the contribution that innovation makes to employment growth.  Lastly, Section VII summarises the main conclusions.