The role of innovation in employment growth, skills demand, and wages: evidence from Ecuador

Abstract

This study’s main objective is assessing the effects of innovation on firms’ employment growth. Further, we aimed to examine the quality of jobs in terms of skills and wages. By applying a structural modeling approach, four types of innovation were considered—namely, product, process, organizational, and marketing. This is the first study to evaluate the role of marketing in depth in this context. We predominantly utilized the database from Ecuador’s 2013 National Survey of Innovation Activities (with firm-level information from 2009–2011). Our results show that innovation exhibits a net effect on employment and contributes to the improvement of job quality. Specifically, product and marketing innovations emerge as important tools for increasing employment in Ecuador. Moreover, product innovation favors high-skilled over low-skilled workers. Finally, innovative firms pay higher wages. Therefore, we provide evidence for a developing country on the relevant role of innovation in employment growth, skills demand, and the payment of higher wages.