Workers’ replacements and firms’ innovation dynamics: New evidence from Italian matched longitudinal data

Abstract

In this paper, we explore the impact of a firm's workers' replacements on innovation performance, by using rich matched employer-employee panel data for the Veneto region of Italy. We take the well-known resource-based theory of the firm as our departure point, and develop a set of hypotheses which we test empirically with negative binomial regressions. Coherently with our theoretical framework, we find that workers' replacements significantly dampen innovation performance, because they generate losses in the tacit knowledge base of the firm. We also find that workers' replacements are especially detrimental to large and young firms, because large companies have more hierarchical rigidities and innovative capabilities in young firms are mostly dependent on specific human capital. Finally, our results show that firms' localization in industrial districts significantly mitigates the negative impact of workers' replacements, and that a similar picture emerges when firms are more exposed to knowledge spillovers, particularly of related knowledge.

Setting Organisational Culture to Develop Potential and Innovativeness

“…Nowadays, innovation is an indisputable part of modern society and a prerequisite for long-term competitiveness, both for individual organisations or states, as confirmed by conclusions of Kiron et al (2013) or Grinza and Quatraro (2019). Innovation is an intentionally proposed change, with which, however, only employees of organisations can come up with, as stated by authors Urbancová (2013), Hitka et al (2019).…”

“…by creating a new type of cooperation with suppliers). Last but not least, it is necessary to mention product innovations that improve organisation's market position (Grinza and Quatraro, 2019;Adams et al, 2016;Bocken et al, 2014). The fact that an organisation comes up with a new product or service brings about several advantages, primarily in building a brand, not only of the product/service, but also the employer's brand.…”

“…Innovations drives competitive advantage thanks to development of new products, services, efficient process set-up, etc. that enable organisations to meet customer needs in the shortest time and as best as possible (Adams, et al, 2019;Corstjens, Carpenter and Hasan, 2019;Grinza and Quatraro, 2019;Bocken et al, 2014).…”

The relationship between R&D, the absorptive capacity of knowledge, human resource flexibility and innovation: Mediator effects on industrial firms

“…The nonsignificant mediator effect of temporary employment is also relevant by itself. Contrary to other scholars (e.g., Beugelsdijk, 2008 , Franceschi and Mariani, 2016 , Grinza and Quatraro, 2019 , Kato and Zhou, 2018 , Michie and Sheehan, 2005 ) that found a negative association between temporary employment and innovation with some limitations, our research explores the mediator effect. Mediator effects are closer to causal relationships than associative measures such as correlations ( Hayes, 2018 , Pieters, 2017 ).…”

Non-standard work and innovation: evidence from European industries

“…Investigations which exploit firm-level data tend to suggest that the use of temporary and part-time contracts and job turnover significantly reduces productivity (Boeri and Garibaldi 2007;Cappellari et al 2012;Devicienti et al 2018;Lucidi and Kleinknecht 2010) and discourages R&D investments and innovation (Franceschi and Mariani 2016;Grinza and Quatraro 2019;Kleinknecht et al 2014;Michie and Sheehan 1999). Few studies report that temporary jobs (Arvanitis 2005;Zhou et al 2011) and part-time work (Altuzarra and Serrano 2010) are positively correlated with the propensity to innovate.…”