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Editor's Choice Allocation of human capital and innovation at the frontier: firm-level evidence on Germany and the Netherlands

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  • Eric Bartelsman
  • Sabien Dobbelaere
  • Bettina Peters

Abstract

This article examines how productivity effects of human capital and innovation vary at different points of the conditional productivity distribution. Our analysis draws upon two large unbalanced panels of 6634 enterprises in Germany and 14,841 enterprises in the Netherlands over the period 2000–2008, considering five manufacturing and services industries that differ in the level of technological intensity. Industries in the Netherlands are characterized by a larger average proportion of high-skilled employees and industries in Germany by a more unequal distribution of human capital intensity. In Germany, average innovation performance is higher in all industries, except for low-technology manufacturing, and in the Netherlands the innovation performance distributions are more dispersed. In both countries, we observe nonlinearities in the productivity effects of investing in product innovation in the majority of industries. Frontier firms enjoy the highest returns to product innovation whereas for process innovation the most negative returns are observed in the best-performing enterprises of most industries. We find that in both countries the returns to human capital increase with proximity to the technological frontier in industries with a low level of technological intensity. Strikingly, a negative complementarity effect between human capital and proximity to the technological frontier is observed in knowledge-intensive services, which is most pronounced for the Netherlands. Suggestive evidence suggests an interpretation of a winner-takes-all market in knowledge-intensive services.

Suggested Citation

  • Eric Bartelsman & Sabien Dobbelaere & Bettina Peters, 2015. "Editor's Choice Allocation of human capital and innovation at the frontier: firm-level evidence on Germany and the Netherlands," Industrial and Corporate Change, Oxford University Press, vol. 24(5), pages 875-949.
    • Handle: RePEc:oup:indcch:v:24:y:2015:i:5:p:875-949.
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    File URL: http://hdl.handle.net/10.1093/icc/dtu038
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    1. repec:kap:decono:v:166:y:2018:i:3:d:10.1007_s10645-018-9322-2 is not listed on IDEAS
    2. repec:eee:jjieco:v:51:y:2019:i:c:p:43-51 is not listed on IDEAS
    3. Dolores Añón Higón & Juan A. Mañez & María E. Rochina-Barrachina & Amparo Sanchis & Juan A. Sanchis, 2018. "Follow the leader: Evidence of the Productivity catch-up of European firms," Working Papers 1806, Department of Applied Economics II, Universidad de Valencia.
    4. repec:eee:wdevel:v:99:y:2017:i:c:p:75-94 is not listed on IDEAS
    5. Caterina Santi & Pietro Santoleri, 2017. "Exploring the link between innovation and growth in Chilean firms," Small Business Economics, Springer, vol. 49(2), pages 445-467, August.
    6. Vincent Vandenberghe, 2017. "The Contribution of Educated Workers to Firms' Efficiency Gains The Key Role of the Proximity to Frontier," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2017012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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