Innovation, Creative Destruction and Structural Change: Firm-Level Evidence from European Countries

43 Pages Posted: 23 Nov 2016

See all articles by Bernhard Dachs

Bernhard Dachs

AIT Austrian Institute of Technology

Martin Hud

ZEW – Leibniz Centre for European Economic Research

Christian Koehler

ZEW – Leibniz Centre for European Economic Research

Bettina Peters

Center for European Economic Research (ZEW)

Date Written: November 15, 2016

Abstract

The shift of employment from lower to higher productive firms is an important driver for structural change and industry dynamics. We investigate this reallocation in terms of employment gains and losses from innovation. New employment created by product innovation may be offset by employment losses in related products, known as ‘cannibalisation’ or ‘business stealing’ effects in the literature, by employment losses from process and organisational innovation and by general productivity increases. The paper investigates this effect empirically with a large dataset from the European Community Innovation Survey (CIS). We find that employment gains and losses increase with technology intensity of the sector. High-technology manufacturing shows the strongest employment gains and losses from innovation, followed by knowledge-intensive services, low-technology manufacturing and less knowledge-intensive services. The net contribution of innovation to employment growth is mostly positive, an exception being manufacturing industries in recession periods.

Keywords: Innovation, employment, reallocation, technology intensity, compensation effect, displacement effect, cannibalisation effect

JEL Classification: O33, J23, C26, D2

Suggested Citation

Dachs, Bernhard and Hud, Martin and Koehler, Christian and Peters, Bettina, Innovation, Creative Destruction and Structural Change: Firm-Level Evidence from European Countries (November 15, 2016). ZEW - Centre for European Economic Research Discussion Paper No. 16-077, Available at SSRN: https://ssrn.com/abstract=2874373 or http://dx.doi.org/10.2139/ssrn.2874373

Bernhard Dachs

AIT Austrian Institute of Technology ( email )

Donau-City-Straße 1
Vienna, 1220
Austria

Martin Hud (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Christian Koehler

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Bettina Peters

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany
+496211235174 (Phone)
+496211235170 (Fax)

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