Employment, Firm Size, and Persistent Innovation: Evidence from an Emerging Economy

Abstract

The relationship between innovation and employment dynamics of firms has been an appealing topic to researchers and policymakers during the last decades. In that context, this paper investigates the impact of innovation persistence on firms’ employment. Following the approach of Bianchini & Pellegrino (2019), we analyze how innovation persistence is related to employment growth rates and employment growth sustainability in an emerging market country like Chile. We also study the moderator effect that firm size has on the relationship between innovation persistence and employment. For our empirical analysis, we use survival analysis and a GMM estimator for assessing this relationship in a 10-year panel database of firms based on innovation surveys, measuring innovation persistence through the hazard rate of innovation spells. Our results show that innovation persistence is positively related to employment and that firm size plays a negative moderating role in the relationship between persistent innovation and both employment growth rates and employment growth sustainability.