Intangible resources: the relevance of training for European firms' innovative performance - IPTS WORKING PAPER on CORPORATE R&D AND INNOVATION - No. 06/2011

This paper assesses how European firms’ innovative performance is impacted by investment in training directly aimed at developing and/or introducing innovation, in addition to the scale of a firm's investment in innovation in relation to the number of R&D personnel. In particular, it explores the complementarity between these two factors (in the presence of a well-trained workforce, the knowledge created by a firm’s R&D personnel can be better exploited), and their dependence on a firm's knowledge intensity (high versus low % of tertiary-educated workforce) and size (SMEs versus large firms). Using European CIS non-anonymised data for the period 1998-2000, this paper estimates a system of simultaneous equations in which investments in training and stock of R&D personnel are treated as endogenous in relation to the innovative sales on which they are presumed to have an effect. The choice to use this time period rather than more recent ones – to which I had access at the Eurostat Safe Centre – is data-driven. It has better information on training expenditure and it is the last period to provide firm-level information on the number of employees with tertiary education. Unlike the majority of CIS-based studies, the main variables of interest are continuous ones, while dummy variables are used as controls only. Empirical evidence confirms most previous results – investment in training and stock of R&D personnel positively affects firms' innovativeness – but also provides some important additional insights. Ceteris paribus, investment in training by firms that are characterised by a relatively lower percentage of tertiary-educated employees shows the highest returns, unlike investments in R&D personnel. At the same time, although investing in R&D personnel shows higher returns in terms of innovativeness in big enterprises, returns from training are less affected by firms’ size, though they still are.JRC.J.2-Knowledge for Growt