This work studies the firm-level relationship between different types of innovative activities and employment growth rates. Improving on previous investigations on the topic, it combines a dynamic panel
analysis of the effects of different types of product and process innovation on employment growth with an outlook on the whole conditional employment growth distribution. Results show that product innovation
– especially in terms of good new to the entire market – has a positive effect on employment growth. This role is likely to be particularly relevant for both fast-growing and shrinking firms. Process innovation
appears instead to have less clear-cut dynamics, consistently with existing evidence. Among different types of process innovation, the introduction of novel auxiliary processes appears to be more positively
linked with employment growth.
Scuola Superiore Sant’Anna and Paris School of Economics