Works councils, training activities and innovation: a study of German firms

Abstract

Building on the distinction between general and technical human capital proposed by Becker (1962), the authors undertake a cross-sectional analysis on the role of works councils in the provision of workplace human resource training for innovative management in medium and large-size private sector establishments in Germany. Results from the first part of the empirical analysis confirm theoretical predictions that works councils are strongly and positively correlated with the provision of general training, while no such relation is found with respect to technical training. Addressing next the potential endogeneity issue, results from an instrumental variable estimation on the correlation between training types and innovation performance provide support that works councils are an effective instrument for promoting general training for incremental innovation in establishments, whereas technical training is found to correlate significantly with radical innovation when instrumented by the share of apprentices.