Institutional complementarities between labour laws and innovation

Abstract

We analyse how institutional complementarities between employee representation laws and dismissal restrictions influence aggregate innovation outcomes. We argue that greater employee voice, due to improved employee representation legislations, may spur innovative effort by employees only when shareholders cannot renegotiate ex-ante agreements with workers over revenue sharing, by threatening dismissal. We perform a panel regression analysis, exploiting country-sector panel data over the 1977–2005 period, and find that stronger employee representation laws in the presence of stricter firing restrictions are in fact associated with higher patenting activity. Consistently with our theoretical argument, the magnitude of this empirical relationship is seen to be relatively larger in those sectors where the human capital contribution to production is higher. Implications for the analysis of economic institutions and for legal policy making are proposed.

Organizational drivers of innovation: The role of workforce agility

“…On this respect, a growing number of contributions emphasize that alongside standard in-house investments in R&D, different aspects of firm organization have positive effects on innovative performance. The latter are usually distinguished between external factors such as research partnerships (Hagedoorn, 2002), knowledge linkages (D'Este and Iammarino, 2010;D'Este and Patel, 2007;Bozdogan et al, 1998;Rangus and Slavec, 2017), user-producer interactions (Von Hippel, 1986) and open-innovation modes (Chesbrough, 2003;Laursen and Salter, 2006), and internal factors, including management practices (Laursen and Foss, 2003;Haneda and Ito, 2018;Bos-Nehles et al, 2017;Shipton et al, 2006;Beugelsdijk, 2008) and governance structures (Addison et al, 2017;Kraft et al, 2011;Belloc, 2019). The present paper integrates this literature by investigating the innovative contribution of a specific components of firm organization that relates to workforce agility.…”

Addressing labour market challenges in Belgium

“…The Belgian labour market shows signs of rigidities with few workers moving between firms and long job tenure rates. On one hand, employment protection legislation provides a degree of worker security encouraging employees to invest in firm-specific expertise and employers to invest in their staff, which can boost innovation (Belloc, 2019;Kleinknecht et al, 2014). On the other hand, a more efficient allocation of labour can enhance productivity growth and improve innovation by increasing the willingness of firms to take more risks (Bartelsman, Gautier and De Wind, 2016) and facilitating the diffusion of new technologies and ideas to firms by new workers.…”

Répondre aux défis du marché du travail en Belgique

“…Le marché du travail belge semble présenter des rigidités car peu de salariés quittent leur entreprise pour une autre et la durée d'occupation des emplois est élevée. D'un côté, les garanties offertes par la législation sur la protection de l'emploi incitent les salariés à s'investir dans l'acquisition des savoir-faire propres à leur entreprise et les employeurs à investir dans le perfectionnement professionnel de leur personnel, ce qui est bon pour l'innovation (Belloc, 2019 ;Kleinknecht et al, 2014). D'un autre côté, une répartition de la main-d'oeuvre plus conforme à l'efficience pourrait stimuler la croissance de la productivité et profiter à l'innovation du fait qu'il encouragerait les entreprises à prendre davantage de risques (Bartelsman, Gautier et De Wind, 2016) Les salaires des employés de bureau qui ont le plus d'ancienneté sont relativement élevés, en Belgique, par rapport à ceux des plus jeunes, ce qui peut constituer un frein à l'employabilité et à la mobilité professionnelle des travailleurs âgés.…”