The Importance of Skills for Innovation and Productivity

Abstract

Rapid progress in skill-biased technologies has increased the demand for skilled workers in all countries. Lack of skilled workers could become a serious impediment to innovation. In this study, we first examine the importance of skills and government support for innovation using firm-level data from Statistics Canada’s Survey of Innovation 1999. We then investigate the role of differences in skills in explaining the differences in productivity levels among Canadian manufacturing industries. After controlling for other factors, we find that firms’ practices of hiring new graduates from universities and hiring experienced employees have positive and significant impacts on innovation outcomes, and that they are equally important for both product and process innovation. In addition, after controlling for industries characteristics, inter-industry differences in labour productivity levels among Canadian two-digit manufacturing industries are positively related to differences in capital intensity, R&D intensity and skills intensity, proxied by two variables: the proportion of employees with 1-3 years post-secondary education; and the percentage of employees with a university degree and more.

Keywords

• innovation