Fact of the Week: Job Growth Has Been 1.5 Percentage Points Higher In Spanish Firms That Are Engaged In Product Innovation Than In Firms That Are Not

January 3, 2017

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Companies that release innovative new products tend to create more jobs than other companies. That’s because demand for innovative new products tends to be higher than demand for similar products on the market. The companies that produce them thus tend to generate more sales revenue and grow faster than others. In turn, they invest more to scale up operations and conduct more research and development—all of which requires more manpower.

This difference in employment growth between firms that are innovating and firms that aren’t is apparent in a preliminary analysis that economist Flavio Calvino has conducted of Spanish manufacturing firms between 2004 and 2012. He finds that employment in firms that release novel products into the market grows 1.5 percentage points faster than firms not engaged in product innovation.

Furthermore, the rest of Calvino’s findings contribute to the growing body of evidence showing that, at the margin, innovation creates more jobs than it sheds as firms adopt productivity-enhancing technologies.