Innovation, employment and skills in services. Firm and sectoral evidence

In this article the employment impact of innovation in the heterogeneous universe of services is investigated, using data provided by the 1993–1995 Italian innovation survey (CIS II). The empirical evidence presented shows that the “direct” impact of innovation on employment varies greatly according to the type of innovation strategy pursued by firms, across industries and according to the level of qualification of the labour force. High skilled and qualified jobs do replace low skilled jobs. Among small firms and in less than half of the service sectors considered the net effect is positive, particularly in industries which have a strong scientific and technological base. The negative impact of innovation on employment is on the contrary concentrated among large firms, capital intensive industries and in all financial-related sectors (banking, insurance and other financial services). In the latter industries the labour-saving effect of innovation seems to be linked to the widespread use of Information and Communication Technologies (ICTs) which have contributed to rationalise and increase labour productivity in an important section of services. In the case of Italy, an overall negative impact of innovation on employment has been found. This result is clearly affected by the de-specialisation of the Italian economy in the knowledge intensive services. From an innovation-policy perspective two lines of actions can be envisaged: one enhancing efficiency in the technologically laggard service sectors and a second one aiming at creating the conditions for the emergence and growth of knowledge-intensive branches. The evidence presented suggests that both these lines of policy action are important but also that the second one is likely to be more rewarding in terms of employment growth.