Flexible employment contracts and their implications for product and process innovation

Abstract

This article reports on the results from a study which examined the relationship between the increasing use of various forms of 'flexible employment contracts' and the incidence of product and process innovations. One body of literature on product and process innovation suggests that it is dependent on attracting, building and nurturing key capabilities. Part of this argument is that employees will be prepared to contribute discretionary effort and to carry the risks involved in innovations only if they have a sense of security in their employment. Innovation, it has been suggested, is 'path dependent' - that is, it emerges from prior experimentation and learning. This thesis might reasonably be regarded as akin to the high commitment end of the human resource management spectrum. Thus, in the face of two decades or more of outsourcing, an increased use of temporary contracts and of part-time working, questions arise about the consequences of such departures from the secure employment contract for the achievement of product and process innovations. Two complementary research methods were used in this research project: first, a postal survey of 2,700 companies using random sampling methods, followed by eight case studies carefully selected using theoretical sampling. The case studies were designed to help unpack some of the main findings from the overall survey. The survey results suggested that there was some evidence to support the view that secure employment and high commitment management are important for innovation but further analysis found that the linkages between types of employment contracting and innovation were rather more complicated in practice. To a large degree, flexible working was found to be a consequence rather than a driver of innovation.