The Effect of On-the-Job Training and Education Level of Employees on Innovation in Emerging Markets

Kyunga Na

doi:10.3390/joitmc7010047

Abstract

This study investigates the effects of on-the-job training and education level of employees on innovation in emerging markets using sample firms from BEEPS 2013 (Business Environment and Enterprise Performance Survey 2013) datasets provided by the World Bank. The Heckman two-stage regression model is used in order to control for endogeneity over a final sample of 10,366 firms in Eastern Europe and Central Asia. To estimate innovation of firms, five indicators of innovation (product, process, organizational, marketing innovation, and R&D investments) are considered. The results of the study suggest that both on-the-job training and education level of employees have significant and positive impact on all forms of innovation. This finding implies that firms in Eastern European and Central Asian emerging markets can promote innovation by offering more on-the-job training programs or recruiting more educated employees.

Highlights

This study examines the relations between innovation of a firm and its human capital factors, such as on-the-job training and education level of employees
Like Dawar and Frost [2], show how innovation has helped firms in emerging markets succeed in rapidly globalizing market, while empirical studies, like Atalay et al [3], demonstrate that innovation has a positive relation with firm performance in emerging markets
This study investigates the effect of education level of employees and on-the-job training on innovation in emerging markets using the BEEPS 2013 (BEEPS V), which broadens the definition of innovation to include product innovation and process innovation, organizational innovation, marketing innovation, and investment in R&D activities (R&D investment)

Summary

Introduction

This study examines the relations between innovation of a firm and its human capital factors, such as on-the-job training and education level of employees. Since innovation is important for a firm’s survival and sustainable economic growth [1], innovation is often researched for firms in both developed countries and emerging markets. Vast literature focuses on the factors that influence innovation. Firm characteristics, such as strong external financing, competition with foreign firms, high education level of manager, and R&D (Research and Development) activities, have been repeatedly shown to lead to innovation [4,5]. Gender diversity has shown mixed results, as gender influences innovation differently based on the position in the firm, ranging from board of directors to employees. Economic, and political background of the firm provide mixed results. Mahmood and Mitchell [7] report that business groups in emerging markets can both promote and hinder innovation

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