Explaining growth differences across firms: The interplay between innovation and management practices

This paper provides first empirical evidence of the joint effects that innovation strategies and human resource management practices exert on firm growth. It shows that investing in technology and implementing performance-based pay policies are both positively associated with a significant turnover, employment and labor productivity growth premium. However, their joint adoption does not necessarily sum the two effects. In particular, for firms strongly relying on R&D as a lever for product and process upgrading, the estimated effect of having in place monetary incentive mechanisms is null or even negative. Job enlargement and employee empowerment policies, instead, are not found to directly impact on growth, independently of the innovation strategy pursued by firms.