Human capital and firms’ innovation: evidence from emerging economies

ABSTRACT

We explore the relationship between human capital and firms’ innovation in emerging economies. Most papers consider the formal knowledge developed in R&D laboratories as a major source of innovation. However, a critical portion of knowledge required for innovation resides in human resources and is created outside any formalised R&D activity. We consider that, to improve their technological capabilities, firms should invest in different forms of human capital, namely highly educated workforce and experienced managers, but also in strategic human resource (HR) practices aimed at developing human capital by increasing employees’ firm-specific technical skills and competences. Besides looking at the type of innovation outcomes, we place greater emphasis on the strategies of innovation development, as these should signal an improved firms’ ability, not just to innovate, but to put their own creative effort in the development of innovation. Our results contrast with the traditional view of firms in emerging economies as mainly relying on the external acquisition of innovations, by showing their actual ability to develop new technologies. In this respect, HR practices aimed at fostering employees’ learning and autonomy at work appear more important than the educational attainment of workers, whilst the experience of managers does not seem effective.

KEYWORDS:

• Emerging economies
• firms’ human capital
• innovation development

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 The countries considered in our analysis have been also included in the analysis of Crowley and Jordan (2017), Mateut (2018) and Ayyagari et al. (2011). In line with these papers, we refer to our countries as emerging economies. Nonetheless, we recognized that this definition is subject to change over time.

2 We include the following countries: Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, FYR Macedonia, Georgia, Hungary, Kazakhstan, Kosovo, Kyrgyz Republic, Latvia, Lithuania, Moldova, Mongolia, Montenegro, Poland, Romania, Serbia, Slovak Republic, Slovenia, Tajikistan, Turkey, Ukraine, and Uzbekistan. We do not consider Russia because not all the questions related to the factors explored in this paper were asked to Russian firms.

3 Consistently to Crowley and Jordan (2017) using BEEPS V.

4 Cassiman and Veugelers (1999, 2006) and Goedhuys and Veugelers (2012).

5 Green (2012) and Cappellari and Jenkins (2003).