Effects of Innovation Activities on Employment Growth in Upper-Middle-Income Countries with High Unemployment Rates

Although previous studies have tried to estimate the impact of innovation on employment growth at the firm level in developed economies, very few studies have investigated this phenomenon in contexts of developing countries with high unemployment rates. This study builds on an existing multi-product approach to develop an econometric model, which analyses the relationship between innovation and employment growth rate at firm level. The analysis of the data indicates that sales growth of new to firm and new to market products have a positive (increasing) effect on employment growth for manufacturing but not the services sectors. On the other hand, overall, process innovations have a negative (decreasing) effect on employment growth, for both the manufacturing and service sectors. The study contributes to the scarce empirical literature in sub-Saharan Africa, by assessing the impact of innovation on employment at firm level using innovation data from CIS-type surveys.