Innovation persistence and employment dynamics

This paper examines the effect of persistence in product and process innovations on the employment dynamics of a representative sample of Spanish manufacturing firms observed over more than 20 years. We build a conceptual framework that links innovation, its persistence, and different trajectories of employment growth. This framework suggests that firms might show different responses in terms of their employment growth and its persistence depending on the degree of persistence in their product and process innovations. We construct a synthetic indicator of innovation persistence at the firm-level and link this indicator to different employment trajectories. We find that persistence in product innovation affects both employment growth and the sustainability of job creation over time significantly, whilst persistence in process innovation does not play any relevant role. Also, the positive effect of persistence in product innovation is particularly strong for SMEs. The evidence we provide supports the notion that product innovation is more effective in spurring sustained employment growth when carried out systematically.