Labour productivity and innovation performance: The importance of internal labour flexibility practices
2015 – This article develops and examines the idea that internal labour flexibility practices are beneficial for labour productivity and innovation performance of companies.
This idea is tested in two studies using unique company level datasets.
In Study 1, results obtained from 377 independent companies revealed that internal labour flexibility practices are positively related to objective labour productivity and its growth in the year following, also when controlled for objective labour productivity and objective external labour flexibility from the year before.
In Study 2, results obtained from 4271 companies indicated that internal labour flexibility practices were positively related to product innovation and labour productivity. Findings suggest that internal labour flexibility practices benefit both labour productivity and innovation performance of companies.
If innovation and labour productivity are considered key to long-term survival, firms and policymakers should consider internal labour flexibility practices, such as:job rotation, multi-tasking, flexible working schedules and allowing for individual tailor-made arrangements.
In fact, companies may, if possible of course, even opt for internal flexibility strategies rather than external flexibility strategies, as our findings and other studies also have demonstrated that external labour flexibility can be negatively related to innovation performance and productivity.
This is perhaps so because external labour turnover and fixed-term contracts discourage investments in human capital, which lowers productivity. At the macro level, researchers have even shown that labour productivity in ‘externally flexible’ Anglo-Saxon countries grew significantly more slowly than in more ‘rigid’ Continental Europe.
Preenen, P. T. Y., Vergeer, R. A., Kraan, K. O., & Dhondt, S. (2015). Labour productivity and innovation performance: The importance of internal labour flexibility practices. Economic and Industrial Democracy. Advance online publication. doi: 10.1177/0143831X15572836
Themes: flexible organization, Innovation & innovation capabilities