Are Micro-Analyses of Employment Effects of Innovation Too Optimistic? A Sector-Level Analysis of the Austrian Economy between 2008 and 2012

Innovation – the development of new products and services as well as the application of new technologies – is widely assumed to be an important strategy for securing or improving competitiveness, growth and welfare. Usually, it is expected that rising competitiveness leads to positive effects on employment, particularly through product innovation. Comparing the innovation activity in the sectors of the Austrian economy which is covered by the European innovation survey CIS in the period 2008-2010 with the employment trends in the years of recovery from the crisis in 2009 until 2012 shows that the situation at sector level is more diverse. Regarding product innovation, the sector-level correlation analysis tends to confirm the often stated positive relation between product innovation and employment growth, but there is also a considerable number of opposite cases. Interestingly, there is almost no difference between general product innovations and products which are new to the market. Regarding the employment effects of process innovation, the group of sectors where there is a relation between process innovation and a reduction of employment and the group where such a relation cannot be found are of similar size. However, the results look very different when focusing on explicitly labour saving process innovations. Here the group of sectors with a negative relation between innovation intensity and employment growth is considerably bigger than in the case of process innovation in general.