Does innovation generate or destroy employment? An application for manufacturing and service firms

Firms engage and invest in innovation mainly for profit-making purposes; they create new products or processes and in turn acquire a larger market share. Labor markets play a key role within countries and firms to boost productivity growth and innovation. Hence, it is of paramount importance to assess how technological change might generate both job gains and losses. These effects depend on the dynamics behind innovation and factors such as the speed of adoption, industries and sectors affected, necessary skills, or speed of adjustment in the labor force. In this paper, we estimate how Colombian firms are performing upon the introduction of several types of innovations such as product, process, organizational and commercialization innovations and the subsequent effects on employment growth. In particular, we seek to disentangle the extent to which there is displacement effect or not by the introduction of innovations in the Colombian context. We examine the effects across several employment categories -skilled and unskilled, male and female, full and part time. In addition, we explore heterogeneities by firm size, innovation intensity, and differences across industry and service sectors.