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Innovation, creative destruction and structural change: Firm-level evidence from European Countries

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  • Dachs, Bernhard
  • Hud, Martin
  • Koehler, Christian
  • Peters, Bettina

Abstract

The shift of employment from lower to higher productive firms is an important driver for structural change and industry dynamics. We investigate this reallocation in terms of employment gains and losses from innovation. New employment created by product innovation may be offset by employment losses in related products, known as 'cannibalisation' or 'business stealing' effects in the literature, by employment losses from process and organisational innovation and by general productivity increases. The paper investigates this effect empirically with a large dataset from the European Community Innovation Survey (CIS). We find that employment gains and losses increase with technology intensity of the sector. High-technology manufacturing shows the strongest employment gains and losses from innovation, followed by knowledge-intensive services, low-technology manufacturing and less knowledge-intensive services. The net contribution of innovation to employment growth is mostly positive, an exception being manufacturing industries in recession periods.

Suggested Citation

  • Dachs, Bernhard & Hud, Martin & Koehler, Christian & Peters, Bettina, 2016. "Innovation, creative destruction and structural change: Firm-level evidence from European Countries," ZEW Discussion Papers 16-077, ZEW - Leibniz Centre for European Economic Research.
  • Handle: RePEc:zbw:zewdip:16077
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    1. repec:ers:journl:v:xx:y:2017:i:2b:p:66-85 is not listed on IDEAS
    2. repec:zbw:zewexp:181906 is not listed on IDEAS
    3. Martin Falk & Eva Hagsten, 2018. "Employment impacts of market novelty sales: evidence for nine European Countries," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 8(2), pages 119-137, June.
    4. repec:wfo:wstudy:60838 is not listed on IDEAS

    More about this item

    Keywords

    innovation; employment; reallocation; technology intensity; compensation effect; displacement effect; cannibalisation effect;

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • D2 - Microeconomics - - Production and Organizations

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