name: title class: title-slide middle left inverse background-image: url("assets/img/Innovation.jpg") background-position: bottom right background-size: 400px <!-- Title Slide -->
Role of Labor Flexibility in the <br> Pursuit of Innovation Strategies
2019 SASE Annual Meeting (New School, N.Y.C.)
Kostiantyn Ovsiannikov, Ph.D.
.small[.blue-medium[University of Tsukuba]]
28 June 2019
??? Image credit: [Unsplash](https://unsplash.com/photos/r9mFb7HyddA) --- ## Does labor flexibility benefit innovation? -- .pull-left[ * **Merits** + Easier reallocation to more dynamic sectors + More incentives to take risks + Job matches 🢂 productivity + "Fresh blood" inflow ] -- .pull-right[ * **Demerits** + Stronger labor protection 🢂 higher wages and productivity + Development of firm-specific skills + Trust 🢂 productivity + Innovation requires long-term incentives, not short-term punishments (Kleinknecht et al., 2014) ] --- ## Focus & Literature gap -- * Focus on **numerical labor flexibility** + "addresses the variation of quantity of labor input" (Arvantis, 2005), + reflects the ability of firms to use the external labor market to replace regular employees and/or to use temporary employees on fixed-term and part-time contracts, often through temporary employment agencies? (Kato & Zhou, 2018). -- * **Literature gap** + previous studies on this topic have mostly concentrated on European cases. Only Kato & Zhou (2018) have recently conducted the study on Japan's startup companies + Kato & Zhou (2018) innovation proxy is a dummy variable (yes/no), mine is the number of applications and citations --- ## Distribution of patent applications across industries <img src="assets/img/image1.png" width="75%" style="display: block; margin: auto;" /> --- ## "Electricity" subindustries with most patent applications <img src="assets/img/image2.png" width="75%" style="display: block; margin: auto;" /> --- ## "Necessities" subindustries with most patent applications <img src="assets/img/image3.png" width="75%" style="display: block; margin: auto;" /> --- ## Companies with highest numbers of patent applications -- .pull-left[ * **Electricity & Communications** + Panasonic: 15009 + Toshiba: 14028 + Mitsubishi Electric: 13219 + Canon: 13165 + Toyota Motor: 10150 + Sharp: 8874 + Fujitsu: 8075 + Sony: 7530 ] -- .pull-right[ * **Necessities (incl. "Games")** + Sankyo : 9168 + Sega Sammy Holdings : 3896 + Universal Entertainment : 2886 + Heiwa : 2434 + Terumo: 2272 + Fujishoji : 2253 + Iseki: 1859 + Unicharm : 1441 ] --- ## Methodology -- * **(Sub-) Industries analyzed** + Electricity and Communications 🢂 "Semiconductors" + Necessities 🢂 "Games" -- * **Sources:** + The Institute of Intellectual Property Patent Database (IIP-DB): patent application data. Companies having > 5 applications (Lechevalier et al., 2010) + Nikkei NEEDS Financial Database: corporate data -- * **Innovation proxy (dependent variable)** + Patent applications: "represent the development of new and technically feasible devices" (Kato & Zhou, 2018) — `quantity aspect` + Patent citations — `quality aspect` (Acharya, Baghai et al., 2010) --- ## Possible conceptualization -- * **Visible innovations** — overcoming commoditization along established lines. Value results from function. -- * **Invisible innovations** (Kusunoki, 2006) + "Rather than boosting existing dimensions, it paints an entirely new picture of how, why, and to whom a new product or service should appeal" (ibid). `Value ~ function` is unclear + "Once a company succeeds in establishing a new product concept, it is often able to produce powerful loyalty and brand effects that trump dimensional superiority" (ibid). + Importance of product-customer interaction -- * Japan is relatively **weak** in knowledge-based industries. **Gaming** is as an exception (Aoyama & Izushi, 2003). -- * Japan's **dual labor market** 🢂 possibility of transition from non-regular to regular employment is only 1.7 to 10.3 percent. **Gaming industry** as an exception (Casper & Storz, 2016). --- class: middle center <img src="assets/img/image7.png" width="40%" style="display: block; margin: auto;" /> --- ## "Semiconductors" — Correlations <img src="assets/img/image8.png" width="80%" style="display: block; margin: auto;" /> --- class: middle center <img src="assets/img/image5.png" width="70%" style="display: block; margin: auto;" /> --- ## "Games" — Correlations <img src="assets/img/image9.png" width="80%" style="display: block; margin: auto;" /> --- class: middle center <img src="assets/img/image6.png" width="70%" style="display: block; margin: auto;" /> --- ## Variables 🢂 Operationalization -- * `Process innovation`: Investment / Capital Stock (Brouwer & Kleinknecht, 1997; Sterlacchini, 1998; Fukao, Ikeuchi et al., 2017) -- * `Internationalization`: Exports / Sales -- * `R&D Intensity`: R&D / Sales -- * `Labor Intensity`: Labor Costs / Fixed Assets --- ## "Semiconductors" regression <img src="assets/img/image10.png" width="80%" style="display: block; margin: auto;" /> --- ## "Games" regression <img src="assets/img/image11.png" width="80%" style="display: block; margin: auto;" /> --- ## Tentative conclusions -- .pull-left[ * **Semiconductors** + Crucial role of `R&D` for innovation, which is linked to `Product Innovation` 🢂 + Negative role of `Process Innovation` 🢂 + `Regulars` (and, possibly, `Non-Regulars`) play an important role 🢀 + 🢀 Positive impact of both **innovation output** (`Patents`) and **innovation input** (`R&D`) on employment + `Larger` and `younger` companies are more innovative ] -- .pull-right[ * **Games** + Important role of `R&D` for innovation + Crucial role of numerical labor flexibility, measured as `Non-regulars' share` + Investment in fixed assets (🢂 `Process Innovation` ) — important for services 🢂 + 🢂 Adjustment of `regulars` + 🢀 Negative impact of **innovation output** (`Patents`); positive impact of **innovation input** (`R&D`) on employment ] --- ## Additional findings -- + **Older** manufacturing firms struggle to innovate -- + **Younger** manufacturing firms employing **non-regulars** innovate more -- + **Internationalization** is associated with less innovation for manufacturing companies employing **non-regulars** --- class: inverse, center, middle # Thank you for your attention!