The Organization of Work and Systems of Labour Market Regulation and Social Protection: A Comparison of the EU-15

Recent work on national systems of innovation (Amable 2003, Hall and Soskice 2001, Lorenz and Lundvall 2006, Whitley 2006) has argued that there are systematic relations between systems of labour market regulation and social protection on the one hand, and the dynamics of knowledge accumulation and learning at the workplace on the other. Systems combining low levels of employment protection with relatively high levels of unemployment protection and expenditure on ‘active’ labour market policies may have an advantage in terms of the adoption of the forms of work organization and knowledge exploration at the firm level that can lead to ‘new to the market’ and possibly radical innovation. This is related to the fact that organizations that compete on the basis of strategies of continuous knowledge exploration tend to have relatively porous organizational boundaries, so as to permit the insertion of new knowledge and ideas from the outside. Job tenures tend to be short as careers are often structured around a series of discrete projects rather than advancing within an intra-firm hierarchy (Lam and Lundvall 2006). While the absence of legal restrictions on hiring and firing will not necessarily result in the forms of labour market mobility that contribute to a continuous evolution of the firm’s knowledge base, strong systems of employment protection may prove an obstacle to their development.