Do trustful labor–management relations enhance innovation? Evidence from German WSI data

Abstract

Analyzing a sample of German firms, our Probit analysis shows that conflictual Anglo-Saxon type labor–management relationships are negatively related to the probability of performing R&D and to introduce innovations. We add to the Varieties of Capitalism literature a number of arguments of why cooperative Rhineland labor relations are superior in handling the ‘routine’ innovation model in knowledge-intensive industries. Notably if innovative competences are based on the stepwise accumulation over long periods of bits and pieces of knowledge for the continuous improvement of products, processes or systems, cooperative Rhineland labor relations appear to be superior to conflictual Anglo-Saxon labor relations.