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Old is Gold? The Effects of Employee Age on Innovation and the Moderating Effects of Employment Turnover

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  • Schubert , Torben

    () (Fraunhofer Institute for Systems and Innovation Research (ISI) And CIRCLE, Lund University, Sweden)

  • Andersson , Martin

    () (CIRCLE, Lund University, Sweden and Blekinge Institute of Technology)

Abstract

There is consistent evidence in the literature that average employee age is negatively related to firm-level innovativeness. This observation has been explained by older employees working with outdated technological knowledge and being characterized by reduced cognitive flexibility. We argue that firms can mitigate this effect through employee turnover. In particular turnover of R&D workers is deemed a vehicle for transfer of external knowledge to the firm, which can compensate for lower cognitive flexibility and up-to-date knowledge among older workers. We use a matched employer-employee dataset based on three consecutive CIS surveys for Sweden to test our predictions. Our results suggest a) that overall employee age impacts negatively on product innovation activities (both in terms of propensity and success), b) that the effect of em-ployee staying rate (measured by the share of employees that remain in the firm from one year to the next) on innovation follows an inverted U-shape implying an ‘optimal’ level of employment turnover, and c) that this ‘optimal’ value is lower for firms with older employees. The latter suggests that firms with older employees can at least partially compensate an aged workforce by increased employment turnover.

Suggested Citation

  • Schubert , Torben & Andersson , Martin, 2013. "Old is Gold? The Effects of Employee Age on Innovation and the Moderating Effects of Employment Turnover," Papers in Innovation Studies 2013/29, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
  • Handle: RePEc:hhs:lucirc:2013_029
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    1. repec:eee:respol:v:48:y:2019:i:1:p:234-247 is not listed on IDEAS
    2. Grillitsch, Markus & Schubert, Torben & Srholec, Martin, 2016. "Knowledge diversity and firm growth: Searching for a missing link," Papers in Innovation Studies 2016/13, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    3. Fassio, Claudio & Kalantaryan, Sona & Venturini, Alessandra, 2015. "Human Resources and Innovation: Total Factor Productivity and Foreign Human Capital," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201536, University of Turin.
    4. repec:spr:anresc:v:58:y:2017:i:3:d:10.1007_s00168-017-0807-8 is not listed on IDEAS
    5. Fassio, Claudio & Kalantaryan, Sona & Venturini, Alessandra, 2015. "Human Resources and Innovation: Total Factor Productivity and Foreign Human Capital," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201536, University of Turin.

    More about this item

    Keywords

    ageing; employee age; innovation; firm performance; R&D; human capita;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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