The impact of sustainability on innovations and firm‘s performance

The impact of sustainability on innovations and firm‘s performance

Andreas Crimmann

European Economic and Social Committee

Labour Market Observatory

Hearing on

"Innovative workplaces as a source of

productivity and quality jobs"

Brussels, December 15, 2010

2

Agenda

1. The MINO-Project

2. Determinants of Innovations

3. Impacts of Innovations

4. Conclusion

3

Agenda

1. The MINO-Project

2. Determinants of Innovations

3. Impacts of Innovations

4. Conclusion

4

Organisational model

Environment: markets,

technologies, institutions

Employees

Innovation Innovation capability

Working and employment conditions

Flexibility/Stability

5

Agenda

1. The MINO-Project

2. Determinants of Innovations

3. Impacts of Innovations

4. Conclusion

6

Hypothesis: higher innovation capability is (i.a.) a function of working and employment conditions

Model: Probit estimation of determinants of product and process innovations 2002/03 and 2005/06

Data: Representative survey data for Germany of the IAB Establishment Panel

References: Crimmann/Evers: Determinants of Innovations: The impacts of working and employment conditions, WISO – special edition, Linz (to be released in 2011)

Determinants of Innovations

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Good working and employment conditions

Indicators

Equal opportunity measures

Measures for older workers

Firm providing (apprenticeship) training

Firm supports or offers further vocational training

Wage above the collectively agreed scale

Profit sharing

Works council

8

Share of Innovatory Establishments in 2007

Quelle: IAB-Betriebspanel 2008

43

42

35

45

44

67

63

52

48

59

Equal opportunity measures

Measures for older workers

Training

Wage above the collectively agreed scale

Works or staff council

Establishments without... Establishments with...

Source: IAB-Establishment Panel 2008

9

Model I

Product

innovations

2002/2003

Model II

Product

innovations

2005/2006

Model III

Process

innovations

2005/2006

Characteristics of establishments R&D in the establishment (1=yes) 0.2977 *** 0.2387 *** 0.1503 ***

Innovations intended, but not carried out (1=yes) 0.2337 *** 0.3285 *** 0.3288 ***

Investments in information and communication technology (1=yes) 0.0509 * 0.0209 0.0525 **

Investments in production facilities, office equipment (1=yes) 0.0578 ** 0.0498 ** 0.0424 **

Branch establishment (1=yes) 0.1040 *** -0.0188 0.0091

West Germany (1=yes) 0.0145 -0.0273 0.0421

Share of highly skilled employees 0.0243 0.1234 * -0.0121

Share of part-time employees -0.1333 ** -0.0584 0.0257

Indicators of sustainability

Equal opportunity measures (1=yes) 0.0261 0.0899 *** 0.1076 ***

Measures for older workers (1=yes) -0.0043 0.1123 *** 0.0499 **

Apprenticeship training (1=yes) 0.1251 *** 0.0899 *** 0.0243

Firm providing further vocational training (1=yes) 0.0509 * 0.0597 *** 0.0375 *

Wage above the collectively agreed scale (1=yes) 0.0382 0.0669 *** 0.0411 **

Profit sharing (1=yes) 0.0777 *** 0.0606 ** 0.0496 **

Works or staff council (1=yes) 0.0003 -0.0324 0.0032

Control Variables

Firm size (number of employees) *** *** ***

Principal shareholder *** *** ***

Industrial sectors *** *** ***

Likelihood-Ratio-Test (χ2) 638.57 *** 640.55 *** 623.61 ***

Pseudo-R2 0.23 0.22 0.20

Number of Cases 2663 3018 3016

*/**/*** shows significance on the 10/5/1 %-level. Marginal effects with heteroscedastticty-robust standard errors. Source: IAB Establishment panel 2001-2007

Determinants of Innovations

10

Agenda

1. The MINO-Project

2. Determinants of Innovations

3. Impacts of Innovations

4. Conclusion

11

Impacts of Innovations

Hypothesis: (product) innovations increase firm performance

Method: Propensity-Score-Matching

Estimation of the propensity score:

Determinants of innovations in 2002/03 (Treatment)

NN-Matching: Comparison of firm performance of „statistical twins“

Data: IAB-Establishment Panel 2001-2009

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Dependent Variables (Matching)

Annual average growth rates of performance indicators:

(2004 – 2008 compared with status in 2001)

of overall employment

of revenues

of labour productivity (added value per employee)

Change in (subjective) profit situation (0=insufficient to 4=very good)

13

The Effect of Product Innovations in 2002/03 on…

Source: IAB-Establishment Panel 2001-2009

14

The Effect of Radical Innovations in 2002/03 on…

Source: IAB-Establishment Panel 2001-2009

15

Agenda

1. The MINO-Project

2. Determinants of Innovations

3. Impacts of Innovations

4. Conclusion

16

Conclusions

Empirical Evidence

1. Attractive working and employment conditions go along with a higher probability of innovations

2. Subsequently, such innovations significantly increase firm‘s performance

Lessons learned

1. Equal opportunities for all groups of employees enhance innovation capability

2. Investments in proper working and employment conditions are sustainable and efficient for firms

Discussion

Andreas Crimmann

Institute for Employment Research

Regensburgerstrasse 104

90748 Nuremberg

Germany

[email protected]

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Back-Up

19

0

2000

4000

6000

8000

10000

12000

14000

16000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

4265 4138 4096 4029 4102 4289 4427

8416

9849 10105 10090 10104 10103 9856 9630 9361 9525

4313 4748

4905 5335

5515

5688 5303 5767 5585 5718 5593 6014 6095 5998 Ostdeutschland

Westdeutschland

8342 8850

9194 9762

13931

15537 15408 15857 15689 15821

15449 15644 15456 15523

Source: IAB-Establishment Panel 1993-2009

The IAB Establishment Panel: Responding Establishments

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Radical innovations: Have you started to offer a completely new product or service within the last two years for which a new market had to be created?

Incremental innovations: Has your enterprise improved or further developed a product that has been part of its line for longer than two years in total?

Product imitations: Has your company, in the last two years, started to offer a product/service that had been on the market before?

Process innovations: Did you develop or implement procedures which have noticeably improved production processes or services during the last two years?

Innovations in the IAB Establishment Panel

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Impacts of Innovations

How do innovations affect the firm performance? Crimmann, Evers, Günther, Guhr, Sunder (2010): Betriebliche Entwicklung von Innovatoren im

Vergleich zu Nicht-Innovatoren im Verarbeitenden Gewerbe, in: Wirtschaft im Wandel (10/2010)

Impact of market innovations in manufacturing sector

Positive effects on employment- and turnovertrend

No significant effects on productivity development and subjective profit situation

3 to 5 years after innovation the performance difference (employment, revenues) in East-Germany between innovators and Non-Innovators is higher compared to West-Germany