Intangible resources: the relevance of training for European firms’ innovative performance

This study investigates the effect that spending in on-the-job training directly aimed at developing and/or introducing innovation and skilled human capital has on innovative sales. In particular, it investigates whether or not the returns on these investments differ between small and medium-sized enterprises (SMEs) and large firms, and the extent to which returns are affected by a firm’s knowledge intensity. Using data from the third Community Innovation Survey, covering 23 European countries, this paper estimates a system of three equations in which investments in training and in the stock of R&D personnel are treated as endogenous in relation to the amount of innovative sales on which they are presumed to have an effect. Empirical evidence confirms that investments in training and in the stock of R&D personnel have a positive effect on firms’ innovativeness and that returns on them are not affected by the degree of knowledge intensity of the firm. However, the returns are always statistically significantly higher in large firms than in SMEs.