Skills and innovation

This study examines the complementarity between employees' skills and firms' innovation activities. It is argued that without sufficient skills, firms benefit less from innovation, because they do not have the requisite complementary capabilities or absorptive capacity. Results from a panel of manufacturing firms provide support for the hypotheses that high technical skills are complementary with R&D collaboration and product or process innovation. Human capital can thus be seen as an enabling factor in profitable innovation. Policy implications suggest that investments in skills help expand the group of firms in the economy that have the potential to innovate successfully.