Training, technology and innovation, and job growth

Econometric analysis using data from World Bank Enterprise Surveys finds significantly higher employment growth (2-4.5 percent) in firms that offer training or use technology and innovation. Firms less likely to use these tools are smaller and in low-income countries. Even though small and medium-size enterprises (SMEs) perceive workforce education and skills as a bigger constraint for their operations relative to large enterprises, they are less likely to offer training or under-invest in it. Two main literature threads address this issue. One focuses on how training affects economic development (Schultz 1964; Jamison and Lau 1982). The other centers on studying innovation and absorptive capacity including technology transfer and innovation in managerial and production skills contribute to higher productivity and efficiency (Smeets 2008; Dutz and others 2011). For instance, Dutz and others find that employment growth rates were higher for innovating firms. In addition, firms exposed to information technology and networks (through the Internet, business associations, and export production) generally innovate more and have larger employment growth. All these studies call for policies that support innovation, including encouraging skill transfer, capacity development, and knowledge access. Yet little effort has been made to examine this issue using cross-country micro-level data. This note sheds light on this issue, using enterprise surveys conducted between 2006 and 2010.