Productivity and Innovation

Employee satisfaction and firm value

Alex Edmans, 25 July 2014

Happy workers might well be more productive than unhappy ones, but high worker satisfaction could also be a sign that workers are overpaid or underworked. This column examines the link between worker satisfaction and future stock returns in 14 countries. In most but not all countries, employee satisfaction is associated with higher future stock returns. Abnormal returns to companies with high worker satisfaction are significantly increasing in the flexibility of their countries’ labour markets.

Agglomeration and product innovation in China

Hongyong Zhang, 21 July 2014

The Chinese government has been actively promoting innovation via policies such as R&D subsidies, tax relief, and location policies. Since 1995, central and local governments have established more than 100 clusters in over 60 cities. This column presents new evidence on the effect of the concentration of firms on product innovation (new products) in the manufacturing industries.

Intellectual property and service sector innovation

Masayuki Morikawa, 20 July 2014

Innovation is a key driver of productivity growth, but innovation in the service sector has received relatively little attention. This column shows that the total factor productivity gap between Japanese firms with and without innovations is larger in services than in manufacturing. Whereas the percentage of firms holding patents is much higher in manufacturing than in services, trade secrets are just as important in both sectors. These results suggest that the protection of trade secrets makes an important contribution to productivity growth.

Connecting Brazil to the world

Patricia Ellen, Jaana Remes, 12 July 2014

Brazil has grown rapidly and reduced poverty over the past decade, but it has grown more slowly than other emerging economies and its income per capita remains relatively low by global standards. This column points out that sectors of the Brazilian economy that have been opened up to international competition have outperformed those that remain heavily protected. Deeper integration into global markets and value chains could provide competitive pressures that would improve Brazil’s productivity and living standards.

Trust-based working time spurs innovation

Holger Görg, Olivier N. Godart, Aoife Hanley, Christiane Krieger-Boden, 8 July 2014

Many firms are replacing traditional working hours with more flexible arrangements, reflecting new thinking on employee motivation. This column presents evidence from Germany that trust-based working time is associated with increased innovation. However, trust-based working hours also contribute to the blurring of workers’ professional and private lives, and may lead to excessive overtime. Careful design of trust-based working arrangements is required to reap the innovations gains while avoiding the health pitfalls.

Other Recent Articles:

Vox eBooks