Flexible Labor and Innovation Performance

2011- Firms with high shares of workers on fixed-term contracts tend to have higher sales of imitative new products but perform significantly worse on sales of innovative new products (“first on the market”). High functional flexibility in “insider–outsider” labor markets enhances a firm’s new product sales, as do training efforts and highly educated personnel. We find weak evidence that larger and older firms have higher new product sales than do younger and smaller firms. Our findings should be food for thought to economists making unqualified pleas for the deregulation of labor markets.
Reference: Zhou, H.,  Dekker, R., Kleinknecht, A. Flexible labor and innovation performance: evidence from longitudinal frim-level data. In: Industrial and Corporate Change, Volume 20, Number 3, 2011, pp. 941–968 (see attachement)

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