Effects of innovation activities on employment growth in upper-middle-income countries with high unemployment rates

Figures & data

Table 1. Descriptive statistics [Mean (Standard deviation)] for employment growth and sales growth of innovative and non-innovative firms, 2010–2012

		Selected Services			Selected Services Total
Indicators	Manufacturing	Whole sale and retail trade	Financial Intermediation	Transport, Storage and Communication
All firms
Employment growth (l)	1.09 (0.25)	1.11 (0.31)	1.16 (0.34)	1.17 (0.66)	1.14 (0.44)
Price growth (µ1)	1.13	1.65	0.95	1.15
Non-innovators
Employment growth (l)	107 (0.23)	1.09 (0.23)	1.19 (0.39)	1.16 (0.36)	1.12 (0.30)
Price growth (µ1)	1.13	1.65	0.95	1.15
Innovators
Employment growth (l)	1.11 (0.27)	1.15 (0.39)	1.14 (0.31)	1.18 (0.78)	1.16 (0.54)
Sales growth – old products (g1)	0.68 (0.55)	0.60 (0.68)	0.50 (0.57)	0.66 (0.75)	0.59 (0.68)
Sales growth – new products (g2)	0.27 (0.39)	0.55 (0.56)	0.29 (0.49)	0.33 (0.46)	0.40 (1.03)
Sales growth – new to market products (g2m)	0.12 (0.24)	0.18 (0.39)	0.09 (0.26)	0.18 (0.37)	0.16 (0.35)
Sales growth – new to firm (g2f)	0.16 (0.28)	0.37 (1.48)	0.20 (0.45)	0.16 (0.25)	0.25 (0.94)
Price growth (µ1)	1.13	1.65	0.95	1.15

Source: BIS 2010–2012 Dataset.

Table 2. Definitions of variables used in the empirical model.

Variable name	Description	Method of computation
l	Employment growth rate	Rate of change of the firm’s overall employment for period 2010–2012
g1	Nominal rate of sales growth due to old products	Rate of change of the firm’s turnover due to product innovations for the period 2010–2012. Computed as the product of the share of turnover due to old (unchanged or not significantly improved) products and the ratio of sales in 2012 to sales in 2010.
µ1, as an estimate of firm-level price growth (π1)	Disaggregated sector price index	Producer price index for the manufacturing sector and sector consumer price index for the service sectors, obtained from Statistics South Africa (Stats SA)
g2	Sales ratio of old to new products	Rate of change of the firm’s turnover due to product innovations for the period 2010–2012. Computed as the product of the share of turnover due to new products and the ratio of sales in 2012 to sales in 2010.
g2m	sales growth generated by market novelties	Rate of change of the firm’s turnover due to product innovations new to the market for the period 2010–2012. Computed as the product of the share of turnover due to new to the market products and the ratio of sales in 2012 to sales in 2010.
g2f	sales growth generated by firm novelties	Rate of change of the firm’s turnover due to product innovations new to the firm for the period 2010–2012. Computed as the product of the share of turnover due to new to the firm products and the ratio of sales in 2012 to sales in 2010.
Pc	Rationalisation (intended for cost-reduction) process innovations	(1/0): Firm introduced one rationalisation process innovation during the period 2010–2012
Pnc	Other process innovations	(1/0): Firm introduced one other process innovation during the period 2010–2012
C1	Part of a larger group	(1/0): Firm was part of a larger enterprise group during the period 2010–2012
C2	Merged with or took over another enterprise	(1/0): Firm merged with or took over another enterprise during the period 2010–2012
C3	Sold, closed or outsourced parts of enterprise	(1/0): Firm sold, closed or outsourced parts of enterprise during the period 2010–2012
C4	Established subsidiaries in other African countries	(1/0): Firm established subsidiaries in other African countries during the period 2010–2012
C5	Established subsidiaries outside of Africa	(1/0): Firm established subsidiaries outside of Africa during the period 2010–2012
C6	Start-up	(1/0): Firm was younger than 5 years old (born after 2007) during the period 2010–2012
C7	Sold goods or services outside South Africa	(1/0): Firm Sold goods or services outside South Africa during the period 2010–2012
Prod_only	Product only innovators	(1/0): Firm developed solely product (and no process) innovations during the period 2010–2012
Proc_only	Product only innovators	(1/0): Firm developed solely process (and no product) innovations during the period 2010–2012
Prod_&_proc	Product and process innovators	(1/0): Firm developed both product product (and process) innovations during the period 2010–2012

Figure 1. Venn Diagram: Different types of product & process innovators (Source: Authors’ own illustration).

Table 3. Descriptions of the instruments and their methods of computation

Variable name	Definition	Sector(s) IV was used
CONT_RD	(1/0): Firm was continuously engaged in intramural R&D activities during 2010–2012	Manufacturing, Service
RANGE	(1/0): Innovations has had a high- to medium-sized impacton an increased range of goods	Manufacturing
PATENT	(1/0): Firm applied for a patent during 2010–2012	Manufacturing, Service
CLIENT	(1/0): Clients have been a high- to medium-sized information source of innovation	Manufacturing, Service
SCIENCE	(1/0): Science (universities, public research institutes) has been a high- to medium-sized information source of innovation.	Manufacturing, Service

Table 4. Effects of Innovation on Employment for South African Manufacturing Firms, 2010–2012.

Regression		(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)
Method		OLS^§	IV^♪ Instruments: Cont_RD, Range	IV^♪ Instruments: Cont_RD, Patent	IV^♪ Instruments: Cont_RD, Client	IV^♪ Instruments: Cont_RD, Science	IV^♪ Instruments: Range, Patent	IV^♪ Instruments: Range, Client	IV^♪ Instruments: Range, Science	IV^♪ Instruments: Patent, Client	IV^♪ Instruments: Patent, Science	IV^♪ Instruments: Client, Science
Model:	Adj. R^2	0.344***	0.259***	0.221***	0.259***	0.245***	0.352***	0.362***	0.347***	0.353***	0.314***	0.347***
	F-statistic	11.611***	4.569***	3.920***	4.572***	4.327***	9.812***	10.271***	9.682***	9.996***	8.541***	9.838***
	Durbin- Watson	1.827	1.955	1.962	1.939	1.901	1.762	1.721	1.724	1.684	1.684	1.695
Factor		Coeff. (t- stat.)	Coeff. (t- stat.)	Coeff. (t- stat.)	Coeff. (t- stat.)	Coeff. (t- stat.)	Coeff. (t- stat.)	Coeff. (t- stat.)	Coeff. (t- stat.)	Coeff. (t- stat.)	Coeff. (t- stat.)	Coeff. (t- stat.)
Constant		2.038 (34.773)***	1.767 (13.988)***	1.829 (14.801)***	1.802 (15.029)***	1.765 (10.905)***	1.827 ( 22.408)***	1.768 (20.739)***	1.773 (13.507)***	1.834 (22.840)***	1.910 (14.853)***	1.827 (14.505)***
Process innovators		−0.644 (−8.982)***	−0.516 (−3.168)***	−0.605 (−3.955)***	−0.544 (−3.494)***	−0.582 (−3.805***	−0.470 (−4.693)***	−0.451 (−4.248)***	−0.461 (−4.614)***	−0.547 (−5.641)***	−0.588 (−6.963)***	−0.535 (−5.572)***
Process only		0.372	0.627	0.646	0.619	0.605	0.470	0.522	0.464	0.524	0.427	0.521
innovators		(3.720)***	(3.650)***	(3.604)***	(3.625)***	(3.499)***	(4.293)***	(4.761)***	(4.254)***	(4.755)***	(3.875)***	(4.735)***
Process		0.176	0.390	0.374	0.343	0.344	0.267	0.302	0.257	0.305	0.222	0.296
innovations		(1.398)	(1.942)*	(1.784)*	(1.721)*	(1.707)*	(2.033)**	(2.312)**	(1.955)*	(2.316)**	(1.659)	(2.241)**
intended for
rationalisation (reduce costs)
Other process		0.376	0.456	.508*	0.489	0.494	0.377	0.390	.381	0.409	0.404	0.411
innovations		(2.709)***	(1.809)*	(1.931)*	(1.949)*	(1.952)*	(2.550)**	(2.668)***	(2.578)**	(2.790)***	(2.676)***	(2.798)***
Product and process		−0.591	−0.209	−0.235	−0.239*	−0.257*	−0.332	−0.286	−0.322	−0.363	−0.461	−0.349
innovators		(−8.221)***	(−1.916)*	(−2.232)**	(−2.333)**	(−2.487)**	(-	(-	(-	(-	(-	(-
							3.935)***	3.391)***	3.772)***	4.659)***	6.065)***	4.487)***
Process innovations intended for rationalisation (reduce costs)		−0.429 (−5.522***)	−0.237 (−2.453)**	−0.260 (−2.587)**	−0.272 (−2.845)***	−0.270 (−2.797)***	−0.270 (−3.329)***	−0.250 (−3.148)***	−0.259 (−3.212)***	−0.314 (−4.003)**	−0.353 (−4.388)***	−0.302 (−3.883)***
Other process		−0.317	−0.089	−0.107	−0.086	−0.096	−0.208	−0.165	−0.185	−0.204	−0.260	−0.181
innovations		(−4.133)***	(−0.921)	(−1.050)	(−0.888)	(−0.965)	(−2.551)**	(−2.025)**	(−2.219)**	(−2.509)**	(−3.100)***	(−2.214)**
Sales growth rate from novelties new to the market		0.193 (1.146)	0.048 (0.487)	−0.010 (−0.097)	0.032 (0.332)	0.007 (0.076)	0.273 (3.577)**	0.202 (2.476)**	0.269 (3.520)***	0.096 (0.971)	0.069 (0.674)	0.259 (3.511)***
Sales growth rate from novelties new to the firm		0.164 (1.212)	0.187 (1.629)	0.070 (0.612)	0.196 (1.638)	0.087 (0.709)	0.075 (0.754)	0.177 (2.241)**	0.060 (0.568)	0.262 (3.570)***	0.080 (0.726)	0.012 (0.115)
Part of a larger group		−0.101 (−1.635)	−0.128 (−1.391)	−0.120 (−1.236)	−0.129 (−1.406)	−0.120 (−1.258)	−0.100 (−1.453)	−0.105 (−1.545)	−0.095 (−1.363)	−0.108 (−1.595)	−0.095 (−1.346)	−0.111 (−1.623)
Merged with or took over another enterprise		−0.164 (−1.805*)	−0.079 (−0.697)	−0.051 (−0.433)	−0.083 (−0.737)	−0.067 (−.589)	−0.142 (−1.506)	−0.131 (−1.405)	−0.141 (−1.488)	−0.133 (−1.415)	−0.150 (−1.557)	−0.134 (−1.426)
Sold, closed or outsourced parts of enterprise		−0.044 (−.439)	−0.135 (−1.002)	−0.117 (−0.828)	−0.155 (−1.152)	−0.133 (−.982)	0.002 (0.022)	−0.017 (−0.162)	−0.003 (−0.024)	−0.019 (−0.181)	−0.009 (−0.083)	−0.033 (−0.306)
Established subsidiaries in other African countries		−0.169 (−1.429)	−0.269 (1.849)*	−0.280 (−1.820)*	−0.291 (−1.997)**	−0.285 (−1.937)*	−0.191 (−1.536)	−0.214 (−1.740)*	−0.194 (−1.557)	−0.247 (−1.990)**	−0.220 (−1.717)*	−0.243 (−1.960)*
Established subsidiaries outside of Africa		0.161 (1.123)	0.141 (0.908)	0.135 (0.827)	0.12 (0.828)	0.122 (.774)	0.174 1.200	0.171 (1.196)	0.166 (1.147)	0.162 (1.128)	0.152 (1.023)	0.158 (1.098)
Start-up		0.389 (3.126)***	0.463 (2.404)**	0.511 (2.551)**	0.481 (2.513)**	0.493 (2.544)**	0.288 (1.892)*	0.286 (1.900)*	0.286 (1.870)*	0.323 (2.148)**	0.350 (2.260)**	0.327 (2.169)**
Sold goods or services in international markets		−0.077 (−1.189)	−0.079 (−0.718)	−0.088 (−0.768)	−0.070 (−0.640)	−0.285 (−1.937)*	−0.090 (−1.204)	−0.066 (−0.890)	−0.083 (−1.107)	−0.064 (−0.869)	−0.087 (−1.145)	−0.054 (−0.728)

Source: South African business innovation survey 2010–2012 data.

^§ Ordinary Least Squares.

^♪ Instrumental Variables.

*,** and *** indicate statistical significance at 10%, 5% and 1%, respectively.

Table 5. Effects of Innovation on Employment for South African Services Firms, 2010–2012.

Regression		(12)	(13)	(14)	(15)	(16)	(17)	(18)
Method		OLS^§	IV^♪ Instruments: Cont_RD, Patent	IV^♪ Instruments: Cont_RD, Client	IV^♪ Instruments: Cont_RD, Science	IV^♪ Instruments: Patent, Client	IV^♪ Instruments: Patent, Science	IV^♪ Instruments: Client, Science
Model:	Adj. R^2	0.314***	0.188***	0.230***	0.209***	0.272***	0.266***	0.274***
	F-statistic	10.670***	2.875***	3.342***	3.095***	6.523***	6.372***	6.616***
	Durbin-Watson	1.471	1.652	1.713	1.720	1.657	1.657	1.667
Factor		Coeff. (t-stat.)	Coeff. (t-stat.)	Coeff. (t-stat.)	Coeff. (t-stat.)	Coeff. (t-stat.)	Coeff. (t-stat.)	Coeff. (t-stat.)
Constant		2.479 (43.004)***	1.836 (12.126)***	1.950 (12.759)***	1.871 (9.834)***	2.278 (23.429)***	2.327 (17.369)***	2.293 (16.587)***
Process innovators		−0.644 (−8.734)***	−0.080 (−0.379)	−0.211 (−0.987)	−0.228 (−1.058)	−0.556 (−5.053)***	−0.567 (−5.761)***	−0.559 (−5.125)***
Process only innovators		0.055 (0.531)	0.617 (3.236)***	0.577 (3.081)***	0.541 (2.875)***	0.229 (1.850)*	0.175 (1.457)	0.221 (1.769)**
Process innovations intended for rationalisation (reduce costs) Other process innovations		−0.447 (−2.135)**	−0.075 (−0.217)	−0.135 (−0.409)	−0.126 (−0.378)	−0.440 (−2.016)**	−0.451 (−2.062)**	−0.438 (−2.009)**
		0.207 (1.785)*	0.712 (3.635)***	0.690 (3.623)***	0.676 (3.537)***	0.384 (2.900)***	0.346 (2.663)***	0.380 (2.857)***
Product and process innovators		−0.694 (−8.920)***	−.0166 (−1.230)	−0.194 (−1.427)	−0.216 (−1.611)	−0.452 (−4.565)***	−0.504 (−5.486)***	−0.446 (−4.533)***
Process innovations intended for rationalisation (reduce costs)		−0.123 (−1.279)	0.037 (0.313)	0.083 (0.719)	0.043 (0.380)	−0.070 (−0.683)	−0.060 (−.592)	−0.061 (−0.606)
Other process innovations		−0.591 (−6.607)***	−0.155 (−1.250)	−0.225 (−1.781)*	−0.180 (−1.490)	−0.384 (−3.621)***	−0.439 (−4.530)***	−0.387 (−3.648)***
Sales growth rate from novelties new to the market		0.274 (2.270)**	0.108 (0.929)	0.049 (0.427)	0.087 (0.752)	0.090 (0.639)	0.081 (0.572)	0.119 (1.276)
Sales growth rate from novelties new to the firm		−0.106 (−0.885)	0.119 (0.791)	−0.208 (−1.488)	0.028 (0.228)	0.119 (1.289)	0.028 (0.251)	−0.009 (−0.076)
Part of a larger group		−0.118 (−1.724)*	−0.223 (−1.897)*	−0.262 (−2.229)**	−0.279 (−2.415)**	−0.201 (−2.320)**	−0.199 (−2.304)**	−0.199 (−2.313)**
Merged with or took over another enterprise		−0.142 (−1.421)	−0.186 (−1.421)	−0.063 (−0.483)	−0.103 (−0.789)	−0.107 (−0.902)	−0.095 (−0.806)	−0.095 (−0.815)
Sold, closed or outsourced parts of enterprise		0.000 (0.002)	0.096 (0.677)	0.077 (0.558)	0.079 (0.573)	0.027 (0.235)	0.024 (0.204)	0.033 (0.286)
Established subsidiaries in other African countries		−0.113 (−0.998)	−0.078 (−0.562)	−0.159 (−1.152)	−0.110 (−0.815)	−0.122 (−0.945)	−0.149 (−1.200)	−0.124 (−0.965)
Established subsidiaries outside of Africa		−0.007 (−0.041)	−0.219 (−0.935)	−0.181 (−0.877)	−0.144 (−0.694)	−0.039 (−0.186)	−0.049 (−0.232)	0.013 (0.066)
Start-up		−0.061 (−0.411)	−0.007 (−0.027)	−0.019 (−0.070)	−0.018 (−0.068)	−0.066 (−0.355)	−0.068 (−0.364)	−0.064 (−0.347)
Sold goods or services in international markets		−0.122 (−1.832)*	0.054 (0.450)	0.116 (0.992)	0.106 (0.892)	−0.107 (−1.292)	−0.101 (−1.196)	−0.0110 (−1.308)

Source: South African business innovation survey 2010–2012 data.

^§ Ordinary Least Squares.

^♪ Instrumental Variables.

*,** and *** indicate statistical significance at 10%, 5% and 1%, respectively.