Innovation-labor biased technical change and growth – Evidence from Finnish innovation value chains (D6.4)

A key determinant of firms’ innovativeness is the quality of their innovation employees.

This paper analyses how intangibles investments yield innovation-labor-biased technical change (IBTC) and knowledge spillovers. IBTC is similar to well-known skill-biased technical change and depends on the recruitment of intangible workers and their quality. In the first stage, quality is proxied by the relative compensation for innovation work. The production function estimates show the quality of innovation work at NACE 3-digit levels after distinguishing the contribution of intangible capital accumulation to productivity.

Using Finnish data for the period 2000-2016, the analysis shows that all elements of structural capital are used in different phases; therefore, organizational capital and related IBTC and innovations are vital parts of productivity growth. IBTC increases all types of innovations and does not show a decrease in technological change.

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