Eurasian Business Review

, Volume 6, Issue 2, pp 189–213 | Cite as

Innovation and job creation: a sustainable relation?

  • Daria Ciriaci
  • Pietro Moncada-Paternò-Castello
  • Peter Voigt
Original Paper


This study compared the employment growth patterns of innovative and non-innovative firms, focusing on whether or not there are systematic differences between these two categories in the persistence of the jobs they create. To this end, a unique longitudinal dataset of 3304 Spanish firms over the period 2002–2009 and a semi-parametric quantile regression approach was used. The empirical results indicate that, ceteris paribus, innovative, smaller and younger firms are more likely to experience high employment growth episodes than non-innovative firms. More interestingly, among those firms that contribute more to yearly job creation (e.g. high-growth firms), only innovative companies are able to sustain high growth over time (in contrast to non-innovative firms). In addition, among declining firms, non-innovators tend to deteriorate faster in terms of economic performance than innovators.


Serial correlation Quantile regression Firm size Firm’s age Job creation; ‘young innovative companies’ (YICs) 

JEL Classification

L11 L25 


  1. Aitchison, J., & Brown, J. A. C. (1957). The lognormal distribution. Cambridge: Cambridge University Press.Google Scholar
  2. Almus, M., & Nerlinger, E. (2000). Testing ‘Gibrat’s law’ for young firms—empirical results for West Germany. Small Business Economics, 15, 1–12.CrossRefGoogle Scholar
  3. Angrist, J. D., & Pischke, J. S. (2009). Mostly harmless econometrics. Princeton: Princeton University Press.Google Scholar
  4. Arrow, K. J. (1962). The economic implications of learning by doing. Review of Economic Studies, 29, 155–173.CrossRefGoogle Scholar
  5. Audretsch, D., Santarelli, E., & Vivarelli, M. (1999). Start-up size and industrial dynamics: Some evidence from Italian manufacturing. International Journal of Industrial Organization, 17, 965–983.CrossRefGoogle Scholar
  6. Baldwin, J. R., & Johnson, J. (1996). Business strategies in more-and less-innovative firms in Canada. Research Policy, 25(5), 785–804.CrossRefGoogle Scholar
  7. Boeri, T., & Cramer, U. (1992). Employment growth, incumbents and entrants: evidence from Germany. International Journal of Industrial Organization, 10, 545–565.CrossRefGoogle Scholar
  8. Bogliacino, F. (2014). Innovation and employment: A firm level analysis with European R&D Scoreboard data. Economia, 15(2), 141–154.CrossRefGoogle Scholar
  9. Bogliacino, F., Lucchese, M., & Pianta, M. (2013). Job creation in business services: Innovation, demand, and polarisation. Structural Change and Economic Dynamics, 25, 95–109.CrossRefGoogle Scholar
  10. Bogliacino, F., & Pianta, M. (2010). Innovation and employment: A reinvestigation using revised Pavitt classes. Research Policy, 39, 799–809.CrossRefGoogle Scholar
  11. Bogliacino, F., Piva, M., & Vivarelli, M. (2012). R&D and employment: an application of the LSDVC estimator using European micro-data. Economics Letters, 116, 56–59.CrossRefGoogle Scholar
  12. Bottazzi, G., Cefis, E., & Dosi, G. (2002). Corporate growth and industrial structure: Some evidence from the Italian manufacturing industry. Industrial and Corporate Change, 11, 705–723.CrossRefGoogle Scholar
  13. Bottazzi, G., Cefis, E., Dosi, G., & Secchi, A. (2007). Invariances and diversities in the evolution of manufacturing industries. Small Business Economics, 29, 137–159.CrossRefGoogle Scholar
  14. Bottazzi, G., Coad, A., Jacoby, N., & Secchi, A. (2011). Corporate growth and industrial dynamics: Evidence from French manufacturing. Applied Economics, 43(1), 103–116.CrossRefGoogle Scholar
  15. Bottazzi, G., & Secchi, A. (2003). Common properties and sectoral specificities in the dynamics of US manufacturing companies. Review of Industrial Organization, 23, 217–232.CrossRefGoogle Scholar
  16. Buchinsky, M. (1998). Recent advances in quantile regression models: a practical guide for empirical research. Journal of Human Resources, 33, 88–126.CrossRefGoogle Scholar
  17. Calvo, J. L. (2006). Testing Gibrat’s law for small, young and innovating firms. Small Business Economics, 26, 117–123.CrossRefGoogle Scholar
  18. Carree, M. A., & Thurik, A. R. (2010). The impact of entrepreneurship on economic growth. In Z. J. Acs & D. B. Audretsch (Eds.), Handbook of Entrepreneurship Research (Vol. 5, pp. 557–594)., Springer USA: New York.CrossRefGoogle Scholar
  19. Castellani, D. (2002). Export behavior and productivity growth: evidence from Italian manufacturing firms. Weltwirtschaftliches Archiv, 138, 605–628.CrossRefGoogle Scholar
  20. Cefis, E., & Marsili, O. (2005). A matter of life and death: Innovation and firm survival. Industrial and Corporate Change, 14, 1167–1192.CrossRefGoogle Scholar
  21. Cefis, E., & Marsili, O. (2006). Survivor: The role of innovation in firm’s survival. Research Policy, 35, 626–641.CrossRefGoogle Scholar
  22. Chesher, A. (1979). Testing the law of proportionate effect. Journal of Industrial Economics, 274, 403–411.CrossRefGoogle Scholar
  23. Ciriaci, D., Moncada-Paternò-Castello, P., & Voigt, P. (2014). Does size of innovative firms affect their growth persistence? In Brussels Economic Review (Vol. 57, No. 3, pp. 317–348). Brussels, Autumn: Dulbea.Google Scholar
  24. Coad, A. (2007). A closer look at serial growth rate correlation. Review of Industrial Organization, 31(1), 69–82.CrossRefGoogle Scholar
  25. Coad, A. (2009). The growth of firms: A survey of theories and empirical evidence. Cheltenham: Edward Elgar Publishing.CrossRefGoogle Scholar
  26. Coad, A., & Rao, R. (2006). Innovation and market value: a quantile regression analysis. Economics Bulletin, 15, 1–10.Google Scholar
  27. Coad, A., & Rao, R. (2008). Innovation and firm growth in high-tech sectors: A quantile regression approach. Research Policy, 37, 633–648.CrossRefGoogle Scholar
  28. Coad, A., & Rao, R. (2011). The firm-level employment effects of innovations in high-tech US manufacturing industries. Journal of Evolutionary Economics, 21, 255–283.CrossRefGoogle Scholar
  29. Coad, A., & Tamvada, J. (2012). Firm growth and barriers to growth among small firms in India. Small Business Economics, 39, 383–400.CrossRefGoogle Scholar
  30. Cohen, W., & Levinthal, D. (1990). Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35, 128–152.CrossRefGoogle Scholar
  31. Colombelli, A., Krafft, J., & Quatraro, F. (2014). High-growth firms and technological knowledge: Do gazelles follow exploration or exploitation strategies? Industrial and Corporate Change, 23, 261–291.CrossRefGoogle Scholar
  32. Czarnitzki, D., & Delanote, J. (2013). Young Innovative Companies: The new high-growth firms? Industrial and Corporate Change, 22(5), 1315–1340. (art. no. dts039).CrossRefGoogle Scholar
  33. Dachs, B., & Peters, B. (2014). Innovation, employment growth, and foreign ownership of firms: A European perspective. Research Policy, 43(1), 214–232.CrossRefGoogle Scholar
  34. Dosi, G. (1988). Sources, procedures and microeconomic effects of innovation. Journal of Economic Literature, 26, 1120–1171.Google Scholar
  35. Dosi, G., & Nelson, R. R. (2013). The evolution of technologies: An assessment of the state-of-the-art. Eurasian Business Review, 3, 3–46.Google Scholar
  36. Dunne, P., & Hughes, A. (1994). Age, size, growth and survival: UK companies in the 1980s. Journal of Industrial Economics, 42, 115–140.CrossRefGoogle Scholar
  37. Edquist, C., Hommen, L., & McKelvey, M. (2001). Innovation and employment, process versus product innovation. Cheltenham: Edward Elgar Publishing.Google Scholar
  38. Ericson, R., & Pakes, A. (1995). Markow-perfect industry dynamics: A framework for empirical work. Review of Economic Studies, 62, 53–82.CrossRefGoogle Scholar
  39. Evangelista, R., & Savona, M. (2003). Innovation, employment and skills in services—firm and sectoral evidence. Structural Change Economic Dynamics, 14, 449–474.CrossRefGoogle Scholar
  40. Evangelista, R., & Vezzani, A. (2012). The impact of technological and organizational innovations on employment in European firms. Industrial and Corporate Change, 21, 871–899.CrossRefGoogle Scholar
  41. Evans, D. S. (1987a). The relationship between firm growth, size and age: estimates for 100 manufacturing industries. Journal of Industrial Economics, 35, 567–581.CrossRefGoogle Scholar
  42. Evans, D. S. (1987b). Tests of alternative theories of firm growth. Journal of Political Economy, 95, 657–674.CrossRefGoogle Scholar
  43. Farinas, J. C., & Moreno, L. (2000). Firms’ growth, size and age: A non-parametric approach. Review of Industrial Organization, 17, 249–265.CrossRefGoogle Scholar
  44. Fernández, E. (1996). Innovación, Tecnología y Alianzas Estratégicas: Factores Clave de la Competencia. Madrid: Biblioteca Civitas Economía y Empresa.Google Scholar
  45. Fizaine, F. (1968). Analyse statistique de la croissance des enterprises selon l’age et la taille. Revue d’Economie Politique, 78, 606–620.Google Scholar
  46. Fotopoulos, G., & Giotopoulos, I. (2010). Gibrat’s law and persistence of growth in Greek manufacturing. Small Business Economics, 35, 191–202.CrossRefGoogle Scholar
  47. Freel, M. S. (2000). Do small innovating firms outperform non-innovators? Small Business Economics, 14, 195–210.CrossRefGoogle Scholar
  48. García-Quevedo, J., Pellegrino, G., & Vivarelli, M. (2014). R&D drivers and age: Are young firms different? Research Policy, 43(9), 1544–1556.CrossRefGoogle Scholar
  49. Geroski, P. A. (1998). An applied econometrician’s view of large company performance. Review of Industrial Organization, 13, 271–293.CrossRefGoogle Scholar
  50. Geroski, P. (2000). Models of technology diffusion. Research Policy, 29, 603–625.CrossRefGoogle Scholar
  51. Geroski, P., & Gugler, K. (2004). Corporate growth convergence in Europe. Oxford Economic Papers, 56, 597–620.CrossRefGoogle Scholar
  52. Geroski, P., & Machin, S. (1992). Do innovating firms outperform non-innovators? Business Strategy Review, 3, 79–90.CrossRefGoogle Scholar
  53. Geroski, P. A., Machin, S., & Walters, C. (1997). Corporate growth and profitability. Journal of Industrial Economics, 452, 171–189.Google Scholar
  54. Geroski, P. A., & Mazzucato, M. (2002). Learning and the sources of corporate growth. Industrial and Corporate Change, 11, 623–644.CrossRefGoogle Scholar
  55. Gibrat, R. (1931). Les Inegalites Economiques. Paris: Librairie du Receuil Sirey.Google Scholar
  56. Goddard, J., Wilson, J., & Blandon, P. (2002). Panel tests of Gibrat’s law for Japanese manufacturing. International Journal of Industrial Organization, 20, 415–433.CrossRefGoogle Scholar
  57. Greenan, N., & Guellec, D. (2000). Technological innovation and employment reallocation. Labour, 14, 547–590.CrossRefGoogle Scholar
  58. Hall, B. (1987). The relationship between firm size and firm growth in the US manufacturing sector. Journal of Industrial Economics, 35, 583–606.CrossRefGoogle Scholar
  59. Hall, B. H., & Mairesse, J., (1995). Exploring the relationship between R&D and productivity in French manufacturing firms. NBER Working papers, no. 3956, National Bureau of Economic Research, Inc., Cambridge.Google Scholar
  60. Harrison, R., Jaumandreu, J., Mairesse, J., & Peters, B. (2014). Does innovation stimulate employment? A firm-level analysis using comparable micro-data from four European countries. International Journal of Industrial Organization, 35, 29–43.CrossRefGoogle Scholar
  61. Hart, P. E., & Oulton, N. (1996). Growth and size of firms. The Economic Journal, 106, 1242–1252.CrossRefGoogle Scholar
  62. Hölzl, W., & Friesenbichler, K. S. (2010). High-growth firms, innovation and the distance to the frontier. Economics Bulletin, 30(2), 1016–1024.Google Scholar
  63. Hopenhayn, H. (1992). Entry, exit and firm dynamics in long run equilibrium. Econometrica, 60, 1127–1150.CrossRefGoogle Scholar
  64. Ijiri, Y., & Simon, H. A. (1967). A model of business firm growth. Econometrica, 35, 348–355.CrossRefGoogle Scholar
  65. Jovanovic, B. (1982). Selection and evolution of industry. Econometrica, 50, 649–670.CrossRefGoogle Scholar
  66. Koenker, R., & Bassett, G. (1978). Regression quantiles. Econometrica, 46, 33–50.CrossRefGoogle Scholar
  67. Koenker, R., & Hallock, K. F. (2001). Quantile regression. Journal of Economic Perspectives, 15, 143–156.CrossRefGoogle Scholar
  68. Lachenmaier, S., & Rottmann, H. (2011). Effects of innovation on employment: A dynamic panel analysis. International Journal of Industrial Organization, 29, 210–220.CrossRefGoogle Scholar
  69. Lopez-Garcia, P., & Puente, S. (2007a). A comparison of the determinants of survival of Spanish firms across economic sectors. In J. M. Arauzo-Carod & M. C. Manjon-Antolin (Eds.), Entrepreneurship, industrial location and economic growth (pp. 161–183). Cheltenham: Edward Elgar Publisher.Google Scholar
  70. Lopez-Garcia, P., & Puente, S. (2007b). Firm productivity dynamics in Spain. Documentos de Trabajo, No. 0739, Banco de España, Madrid.Google Scholar
  71. Lopez-Garcia, P., Puente, S., & Gomez, Á. L. (2009). Employment generation by small firms in Spain. Bank of Spain Working Paper, No. 0903.Google Scholar
  72. Lotti, F., Santarelli, E., & Vivarelli, M. (2003). Does Gibrat’s law hold among young, small firms? Journal of Evolutionary Economics, 13, 213–235.CrossRefGoogle Scholar
  73. Lotti, F., Santarelli, E., & Vivarelli, M. (2009). Defending Gibrat’s law as a long-run regularity. Small Business Economics, 32, 31–44.CrossRefGoogle Scholar
  74. Mansury, M. A., & Love, J. H. (2008). Innovation, productivity and growth in US business services: a firm-level analysis. Technovation, 28, 52–62.CrossRefGoogle Scholar
  75. Meghir, C., Meghir, A., & Van Reenen, J. (1996). Job creation, technological innovation and adjustment costs: Evidence from a panel of British firms. Annales d’Economie et de Statistique, 41/42, 255–274.Google Scholar
  76. Mohnen, P., & Hall, B. H. (2013). Innovation and productivity: An update. Eurasian Business Review, 3, 47–65.Google Scholar
  77. Moreno, A. M., & Casillas, J. C. (2007). High-growth SMEs versus non-high-growth SMEs: a discriminant analysis. Entrepreneurship and Regional Development, 19, 69–88.CrossRefGoogle Scholar
  78. Navaretti, G. B., Castellani, D., & Pieri, F. (2014). Age and firm growth: evidence from three European countries. Small Business Economics, 43(4), 823–837.CrossRefGoogle Scholar
  79. Nelson, R. R., & Winter, S. G. (1982). An evolutionary theory of economic change. Cambridge: Harvard University Press.Google Scholar
  80. Nunez, S. (2004). Salida, entrada y tamaño de las empresas Españolas. Boletín Económico, March, Banco de España, Madrid.Google Scholar
  81. Pianta, M. (2005). Innovation and employment. In J. Fagerberg, D. C. Mowery, & R. R. Nelson (Eds.), The Oxford handbook of innovation. Oxford: Oxford University Press.Google Scholar
  82. Piva, M., Santarelli, E., & Vivarelli, M. (2005). The skill bias effect of technological and organisational change: Evidence and policy implications. Research Policy, 342, 141–157.CrossRefGoogle Scholar
  83. Piva, M., & Vivarelli, M. (2005). Innovation and employment, evidence from Italian microdata. Journal of Economics, 86, 65–83.CrossRefGoogle Scholar
  84. Quatraro, F., & Vivarelli, M. (2014). Drivers of entrepreneurship and post-entry performance of newborn firms in developing countries. The World Bank Research Observer, 30(2), 277–305.CrossRefGoogle Scholar
  85. Ruano, S. (2000). Creación y destrucción bruta de empleo en las empresas industriales Españolas. Investigaciones Económicas, 24, 563–584.Google Scholar
  86. Santarelli, E., Klomp, L., & Thurik, A. R. (2006). Gibrat’s law: an overview of the empirical literature. Entrepreneurship, Growth, and Innovation (pp. 41–73) USA: Springer.Google Scholar
  87. Scherer, F. M. (1999). New perspectives on economic growth and technological innovation. Washington, DC: Brooking Institution Press.Google Scholar
  88. Schneider, C., & Veugelers, R. (2010). On young highly innovative companies: Why they matter and how (not) to policy support them. Industrial and Corporate Change, 19, 1–39.CrossRefGoogle Scholar
  89. Schumpeter, J. A. (1942). Capitalism, socialism and democracy. New York: Harper.Google Scholar
  90. Singh, A., & Whittington, G. (1975). The size and growth of firms. Review of Economic Studies, 42, 15–26.CrossRefGoogle Scholar
  91. Spearot, A. C. (2012). Firm heterogeneity, new investment and acquisitions. Journal of Industrial Economics, 60, 1–45.CrossRefGoogle Scholar
  92. Steiner, M. P., & Olaf, S. (1988). Factors for success in small manufacturing firms. Journal of Small Business Management, 26, 51–56.Google Scholar
  93. Sutton, J. (1997). Gibrat’s legacy. Journal of Economic Literature, 35, 40–59.Google Scholar
  94. van Reenen, J. (1997). Employment and technological innovation: evidence from UK manufacturing firms. Journal of Labor Economics, 15, 255–284.CrossRefGoogle Scholar
  95. van Stel, A., Carree, M., & Thurik, R. (2005). The effect of entrepreneurial activity on national economic growth. Small Business Economics, 24, 311–321.CrossRefGoogle Scholar
  96. Veugelers, R. (2008). The role of SMEs in innovation in the EU: A case for policy intervention? Review of Business and Economics, 53, 239–262.Google Scholar
  97. Vivarelli, M. (1995). The economics of technology and employment: theory and empirical evidence. Aldershot: Edward Elgar.Google Scholar
  98. Vivarelli, M. (2013a). Is entrepreneurship necessarily good? Micro-economic evidence from developed and developing countries. Industrial and Corporate Change, 22, 1453–1495.CrossRefGoogle Scholar
  99. Vivarelli, M. (2013b). Technology, employment and skills: An interpretative framework. Eurasian Business Review, 3, 66–89.Google Scholar
  100. Wagner, J. (1992). Firm size, firm growth, and persistence of chance: Testing Gibrat’s law with establishment data from lower Saxony, 1978–1989. Small Business Economics, 2, 125–131.CrossRefGoogle Scholar
  101. Weiss, C. (1998). Size, growth, and survival in the upper Austrian farm sector. Small Business Economics, 10, 305–312.CrossRefGoogle Scholar
  102. Yasuda, T. (2005). Firm growth, size, age and behavior in Japanese manufacturing. Small Business Economics, 24, 1–15.CrossRefGoogle Scholar

Copyright information

© European Union 2015

Authors and Affiliations

  • Daria Ciriaci
    • 1
  • Pietro Moncada-Paternò-Castello
    • 2
  • Peter Voigt
    • 1
  1. 1.European Commission, Directorate-General for Economic and Financial AffairsBrusselsBelgium
  2. 2.European Commission, Joint Research CentreSevilleSpain

Personalised recommendations