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Work arrangements and firm innovation: is there any relationship?

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  • Caterina Giannetti
  • Marianna Madia

Abstract

This study investigates the relationship between labour market flexibility—proxied by the proportion of workers with different contractual arrangements and other indicators of flexible work relations—and firms' innovative ability, as measured by the percentage of new products in total sales. On the one hand, 'more flexibility' (e.g. a higher labour turnover) might be favourable to a firm's innovation potential. Aside from having (potential) wage savings, a larger inflow of new personnel may enrich the pool of firm innovative ideas. On the other hand, higher work flexibility may also have some drawbacks: a permanently high turnover rate may diminish social cohesion and trust and increase the probability of opportunistic behaviour. Results suggest that internal flexibility is positively associated with innovation for both high-tech and low-tech firms. Especially for high-tech firms, however, greater external flexibility might hinder innovation. Copyright , Oxford University Press.

Suggested Citation

  • Caterina Giannetti & Marianna Madia, 2013. "Work arrangements and firm innovation: is there any relationship?," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 37(2), pages 273-297.
    • Handle: RePEc:oup:cambje:v:37:y:2013:i:2:p:273-297
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    File URL: http://hdl.handle.net/10.1093/cje/bes067
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    Cited by:

    1. Rupietta, Kira, 2015. "How does Part-time Work Affect Firm Performance and Innovation Activity?," Working papers 2015/05, Faculty of Business and Economics - University of Basel.
    2. Lee, Kyounghun & Oh, Frederick Dongchuhl & Shin, Donglim & Yoon, Heejin, 2023. "Internal labor markets and corporate innovation: Evidence from Korean chaebols," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 146-162.
    3. Sarbu, Miruna, 2022. "Does telecommuting kill service innovation?," Research in Transportation Economics, Elsevier, vol. 95(C).
    4. Jaana Rahko, 2017. "Knowledge spillovers through inventor mobility: the effect on firm-level patenting," The Journal of Technology Transfer, Springer, vol. 42(3), pages 585-614, June.
    5. Uschi Backes-Gellner & Marlies Kluike & Kerstin Pull & Martin R. Schneider & Silvia Teuber, 2016. "Human resource management and radical innovation: a fuzzy-set QCA of US multinationals in Germany, Switzerland, and the UK," Journal of Business Economics, Springer, vol. 86(7), pages 751-772, October.
    6. Valentina C. Materia & Stefano Pascucci & Liesbeth Dries, 2017. "Are In-House and Outsourcing Innovation Strategies Correlated? Evidence from the European Agri-Food Sector," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(1), pages 249-268, February.

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