Whether the use of flexible workers is damaging to innovation or not depends on the dominant innovation regime in a sector. In sectors with a 'routinised' innovation regime, high shares of low-paid temporary workers have a negative impact on the probability that firms invest in R&D. In sectors that tend towards a 'garage business' regime, however, flexibility has no impact. The two innovation regimes differ in the nature of their knowledge base: reliance on generally available knowledge or dependence on a firm's historically accumulated knowledge base. Innovation in the latter regime benefits from longer job durations. Our results are consistent with findings in macro-level studies that coordinated market economies with rigid labour markets have higher labour productivity gains than liberalised market economies.

Determinants of R&D, Entrepreneurship, Routinised innovation, Schumpeterian innovation models, Varieties of capitalism
dx.doi.org/10.1093/cje/bet077, hdl.handle.net/1765/85438
Cambridge Journal of Economics
Erasmus University Rotterdam

Kleinknecht, A, van Schaik, F.N, & Zhou, H. (2014). Is flexible labour good for innovation? Evidence from firm-level data. Cambridge Journal of Economics, 38(5), 1207–1219. doi:10.1093/cje/bet077