Employment and innovation in recessions: firm-level evidence from European Countries

The race between man and machine: implications of technology for growth, factor shares, and employment

Bettina Peters (), Bernhard Dachs, Martin Hud and Christian Köhler

Industrial and Corporate Change, 2022, vol. 31, issue 6, 1460-1493

Abstract: This paper investigates the employment effects of innovation over the business cycle with a large data set of manufacturing firms from 26 European countries from 1998 to 2014. The paper reveals four important findings: First, the net employment effect of product innovation is pro-cyclical and positive except in recessions. Second, product innovators are more resilient in recessions than non-product innovators because they are able to substitute demand losses in old products with new products. As a result, the net employment losses of product innovators are significantly lower in recessions than those of non-product innovators. Third, we find resilience only among small and medium-sized enterprises (SMEs), but not among large firms. Fourth, process and organizational innovations displace labor primarily during upturn and downturn periods.

Date: 2022
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