Innovation, Employment Growth, and Foreign Ownership of Firms - A European Perspective

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Non-Technical SummarySubsidiaries of foreign multinational enterprises (MNEs) are among the top performers of research, development and innovation in many EU and non-EU countries. In some smallEuropean countries -examples are Austria, Belgium, the Czech Republic, Hungary or Ireland -foreign-owned firms even account for more than 50% of total business expenditure for R&D.The high relevance of foreign ownership for technology and innovation policy calls for a sound understanding of the innovation behaviour of foreign-owned firms and its impact on economic performance. Using the theoretical model of Harrison, Jaumandreu, Mairesse and Peters (2008), this paper contributes to the existing literature by disentangling sources of employment growth by ownership, and it particularly investigates the role product and process innovation play for employment in foreign-owned and domestically owned firms. We examine the link between innovation and employment using a large data set (Community Innovation Surveys CIS4) of more than 64,500 firms from 16 European countries.Previous studies have shown that innovation and technology are key dimensions in which foreign-owned and domestically owned firms differ. There is ample evidence that MNEs tend to possess superior firm-specific assets, operate more frequently in R&D-intensive sectors and employ more highly-qualified staff than domestically owned firms. Both groups also differ in their capabilities to create new products and in their ability to successfully introduce innovations to the market. Our analyses enlighten that these differences, in turn, lead to differences in employment creation and destruction from innovation between the two groups.We find that foreign-owned firms experience higher employment losses than domestically owned firms due to general (non-innovation related) productivity improvements and in manufacturing also partly due to process innovation. A likely explanation for this finding is that foreign-owned firms that introduce new processes adopt superior technologies of their parent companies. In addition and in contrast to domestic firms, most foreign-owned firms are able to produce new products with a higher efficiency than existing products (except for European FOF in manufacturing). These larger productivity gains might be worrying as they imply that foreign-owned firms would need to create much more jobs with product innovation and existing products to meet the employment growth rate of domestically owned f...

Association of SME and Government Policy Factors with the Creation of New Employment: Manufacturing Industry in Korea

“…This is quite plausible as the majority of prior studies have arrived at similar results (Dachs and Peters 2014;Harrison et al 2008;Lofsten and Lindelof 2005). It is worth noting that organizational innovation does not generally require many employees and does not aim at creating new employment.…”

“…Theoretically, classical economists emphasized that the impact of product innovation and technological innovation leads to a large, positive employment effect. Empirically, most studies have also indicated that product innovation promotes job creation (Dachs and Peters 2014;Harrison et al 2008;Lofsten and Lindelof 2005). It is worth noting that a new product developed through product innovation may completely replace an existing product, which could have a negative effect on employment generation.…”

“…They considered SMEs' basic factors, such as a firm's age and the volume of sales (Kim 2012;Kim and Bae 2005). Recently, several studies have focused on the effect of technology innovation activities on employment growth (Dachs and Peters 2014;Kwon et al 2015). Based on the prior studies, our study is designed to provide a deeper and more comprehensive understanding of the association between SMEs-related factors and the creation of employment.…”

Innovation, creative destruction and structural change: firm-level evidence from European countries

“…(Sutton 1997). In the case of foreign ownership, Dachs and Peters (2014) recently showed that employment grows slower and is also more volatile in foreign-owned firms. GDP growth is included to reflect demand conditions in a particular country.…”

Innovation and Its Effects on Employment Composition: Microeconomic Evidence from Colombian Firms

“…Additionally, according to Dachs and Peters (2014) Survey, its is found that 10% of the firms innovate both in products and processes. As depicted in table 17, another important aspect related to manufacturing firms is that they tend to undertake more innovation just in processes, rather than product innovation.…”