Adoption of Techno-Organizational Innovations, and Industrial Relations in Manifacturing Firms: An Analysis for Local Industrial System

Both practitioners and those who contribute to the economic and managerial literature recognize that improving firm performance requires both organizational and technological innovation. For the most part, the literature, both theoretical and empirical, concentrates on one or the other aspect, but since the two types of innovation are likely to co-evolve with mutual influence, empirical analysis should concentrate on both. This paper primarily addresses the relevance of labour participation and human resource management practices to both types of innovation. It results from a project designed to study various forms of flexibility in labour management and industrial relations in a sample of industrial firms in Reggio Emilia, a province within the Emilia-Romagna region of Italy. The core of the paper looks at the innovations managers have adopted and the extent to which employee involvement played a part in the process. A crucial distinction is between the direct involvement of employees, and indirect involvement mediated by union organisation and union officials. We see the factors which lead to techo-organizational innovations and their diffusion as operating within an industrial relations context, the nature and quality of which constrains managers' innovative initiative. The econometric work focuses on the explaining factors of techno-organisational innovations, being firm performance indicators, industrial relations indices, measures of labour flexibility and of structural characteristics of the firms. The variables which seem to be important are: firm size, the flatness of the hierarchical structure, the use of flexible contracts in new hiring, the quality of industrial relations, past profitability, access to capital markets, and low levels of labour productivity. The significance of these various factors varies with the type of innovation.