Workplace Organization and Innovation

Abstract

This study uses panel data on Canadian establishments to explore the relationship between the organization of work – in particular decentralization, informationsharing, and incentive pay schemes – and innovation. Like other studies, ours finds a clear positive link between these factors. However, the data give strong indications that this relationship is not causal.We show that: (1) the correlation between workplace organization and innovation holds for information-sharing but is much weaker for decentralized decision-making or incentive pay programs, (2) controls for unobserved heterogeneity significantly weaken results, and (3) lagged variables give no clear evidence that organizational changes predate innovation.