Unions, collective relations laws and R&D investment in emerging and developing countries

Many scholars argue that workforce unionization leads to a reduction in R&D investment because unions appropriate a share of the returns to successful inventive efforts. On the other hand, it is widely acknowledged that unions may encourage investment in R&D because of increased cooperation between workers and management. Our empirical analysis on cross-country firm- level data from 23 emerging and developing countries reveals a negative association between workforce unionization and firms' R&D investment. This association is particularly pronounced when unions are protected by strong collective relations laws, supporting the notion that strong unions 'tax' the returns to successful inventions. Our findings have implications for policy makers who seek to improve emerging countries' chances of catching up to the technological frontier, and for firm leaders concerned about the appropriation of returns to their R&D investments.