Education, Tenure and Innovation in Manufacturing Firms

This study describes the stock of education and firm-specific work experience in a sample of Finnish manufacturing firms. The focus is in particular on the interaction of these competence measures with innovation. Generally speaking the levels of education are rising. Especially, the share of employees with a technical or natural scientific degree is increasing, together with the number of post-graduate degree employees. However, the sectoral differences are considerable. Industries of rapid technological change are very intensive in general and higher technical competences. In capital intensive industries, instead, the average tenure is clearly longer and the level of education lower. The differences between innovating and non-innovating firms are examined, as well. Innovating firms have a more educated labor force, and they are more profitable than non-innovators. The better economic performance may result from the flexibility of innovating firms. For instance, they recovered clearly more rapidly from the economic slump of the turn of the decade 1980-90. Product and process innovating firms are characterized also with principal components. The results lend support to the hypothesis that the size of the the firm affects the composition of R&D. It is observed that non-innovators are small and stagnating firms. Product innovators are slightly bigger, rather labor intensive, and endowed with high and increasing levels of general and technical competences. Comprehensive innovators, i.e. firms carrying out both product and process innovation remind in many respects product innovators, but are bigger, and have started to decrease their labor intensity. Finally, process innovators are the largest firms on average. Their labor intensity is significantly lower, and they rely more on research competences than general or technical skills

Dynamic Competences and Firm Performance

This empirical study investigates the impact of competencies and knowledge capital on economic performance of firms. According to the dynamic capability approach, the profitability of firm is determined by its position in strategic capabilities. The accumulation of capabilities is proxied here by levels and fields of education, which are assumed to correlate with the rate of learning. On the other hand, successful innovation is an indirect manifestation of dynamic technological capabilities. The effects of these capability measures on profitability are estimated with a panel data-set of 209 Finnish manufacturing firms. Of special interest are the complementarities between knowledge assets, accounted for with interactions between variables. Finally, the differences in the determinants of profitability between innovating and non-innovating firms are examined, because profiting from innovation is expected to be associated with different set of skills and competencies than 'normal' business. The main findings include that educational indicators of competence are significantly associated with profitability. Interactions between different levels and fields of education turn out to have the most important effects. For example, the positive effect of post-graduate level employees is conditioned by a sufficient amount of employees with general skills acquired in higher education. This suggest there indeed exist complementarities between different types of capabilities: research skill contribute to profitability only if there are enough general competencies, which facilitate applying and commercializing the results of R&D. Interactions are also detected between innovativeness and competencies. Profitability of innovating firms seems to differ from that of non-innovating ones. In particular, educational competencies are more important for innovators. A successful 'knowledge strategy' of the firm involves simultaneous choices of investment in R&D and capabilities in different functions of the firm

Education and Innovative Capabilities

This study investigates the role of capabilities, acquired through education and on the job learning, in innovation. It is argued that education enhances learning and innovation because it provides employees with communication and interaction skills, and, more importantly, with abilities to receive, understand and utilize relevant knowledge, and solve problems. These dynamic capabilities are one of the sources of innovation. A dataset of 333 Finnish manufacturing firms is used to estimate the factors that influence the probability of making product and process innovations, and incremental product improvements. The period of study is 1987-91. The estimations suggest that competences and skills acquired through education and work experience are important for innovation. Different types of innovation turn out to be affected by different competences. General level of education is important for product innovation. Technical skills are relevant for both innovation and incremental improvement of products, whereas firm-specific work experience comes into play with incremental product improvements and process innovation. However, process innovation seems to be determined mainly by firm size, instead of competences or industry-specific factors. This suggests that the life cycle stage may be related to the type of innovation undertaken. According to the estimations there are considerable lags involved with the effects of competences on innovation. However, longer time series would be needed to evaluate the underlying dynamics properly

Exploring the Sources of Skill-Biased Technical Change: A Firm Performance Perspective

WP 2002-11 May 2002JEL Classification Codes: O12; O15; O31; O32; O33The literature on skill-biased technical change has examined the role of skills in the adoption of new technology. Here the focus is on the creation of new technology, that is, innovation. Low skill firms are hypothesized to benefit less from innovation activities, particularly collaborative research and development (R&D). In other words, skills and innovation are complementary. Complementarities associated with innovation may generate persistent differences in firm behavior and performance. Results from a panel of manufacturing firms indicate that technical skills reinforce the profitability effects of innovation and R&D collaboration. Skills, collaboration, and innovation form a system of interdependent activities

Innovating standards through informal consortia: The case of wireless telecommunications

International audienceWe empirically examine the effects of industry consortia on the coordination of innovation strategies of the members. Our analyses utilize membership data from 32 consortia in wireless telecommunication technology subfields from 2000 to 2005 and prior art citations in standard-essential patents. We find that connections among firms in informal and technically-oriented consortia significantly increase the likelihood that firms cite each other's patents in subsequent patents essential for the UMTS wireless telecommunication standard. Inventions that are likely to become part of the UMTS system tend to build on inventions by firm peers who were members of the same consortia, controlling for patent or firm fixed effects, technology class, and other characteristics. Consortia may enhance productivity of invention and increase the incentives to invest in R&D by internalizing potential externalities. They may also enhance efficiency of standardization by facilitating the interaction of committee and market processes. Consortia thus structure and constrain the process of innovating standardized technologies. This is problematic if consortia are not truly accessible for all the relevant parties. Policymakers thus need to balance these effects. For managers, the results show that participation in a variety of technical consortia enables influencing peers' innovation strategies related to compatibility standards

Firms’ knowledge search and local knowledge externalities in innovation performance

We use an augmented version of the UK Innovation Surveys 4–7 to explore firm-level and local area openness externalities on firms’ innovation performance. We find strong evidence of the value of external knowledge acquisition both through interactive collaboration and non-interactive contacts such as demonstration effects, copying or reverse engineering. Levels of knowledge search activity remain well below the private optimum, however, due perhaps to informational market failures. We also find strong positive externalities of openness resulting from the intensity of local interactive knowledge search—a knowledge diffusion effect. However, there are strong negative externalities resulting from the intensity of local non-interactive knowledge search—a competition effect. Our results provide support for local initiatives to support innovation partnering and counter illegal copying or counterfeiting. We find no significant relationship between either local labour quality or employment composition and innovative outputs