This study examines the impact of innovation strategies on employment
growth in four Latin American countries (Argentina, Chile, Costa Rica,
and Uruguay) using micro-data for manufacturing firms from innovation
surveys. Building on the model proposed by Harrison et al. (2008), we
relate employment to three innovation strategies: make only (R&D), buy
only (external R&D, licensing of patents and know-how, technical
assistance, and other external innovation activities) and make and buy
(mixed strategy). Firms that conduct in-house innovation activities
("make only") have the greatest impact on employment; the "make and buy"
strategy comes in second. Similar results are found for small firms.
These results highlight the importance of fostering in-house
technological efforts not only for innovation per se, but also to
promote growth in firm employment. The impact of "make only" strategies
is greater in high-tech industries, whereas "make only" and "make and
buy" have a similar impact on employment in low-tech industries.
Finally, the study provides evidence of the mechanisms through which
innovation strategies affect employment. The findings show that
innovation strategies enhance technological innovation, but their impact
differs between product and process innovation. Product innovation is
mainly motivated by in-house technology investments, followed by mixed
strategies, whereas process innovation is basically driven by "buy"
JEL: O12, O14, O31, O33, O40, J21
Keywords: innovation, employment, external R&D, Latin America, innovation surveys