Creative and science oriented employees and firm-level innovation. (August 2018) - Brunow, Stephan
Abstract: This paper examines the link between innovation and the endowments of creative and science oriented STEM – Science, Technology, Engineering and Mathematics – workers at the level of the firm and at the city-/regional-level in Germany. It also looks into whether the presence of these two groups of workers has greater benefits for larger cities than smaller locations, thus justifying policies to attract these workers in order to make German cities 'smarter'. The empirical analysis is based on a probit estimation, covering 115, 000 firm-level observations between 1998 and 2015. The results highlight that firms that employ creative and STEM workers are more innovative than those that do not. However, the positive connection of creative workers to innovation is limited to the boundaries of the firm, whereas that of STEM workers is as associated to the generation of considerable innovation spillovers. Hence, attracting STEM workers is more likely to end up making German cities smarter than focusing exclusively on creative workers. Highlights: We examine the link between firm innovation and workforce employed with a specific focus on creative and STEM employees but also on regional, industry-specific spillover effects We find significant effects on innovation of both groups employed within the firm There is a significant spillover effect caused by STEM employees in the region on firms incentives to innovate There is no spillover effect on creative employees outside the firm on innovation A unique German data set is used covering more than 38, 500 German firms for the years 1998-2015.