This work lies within the literature that investigates the co-causation relationships between innovation activities, broadly conceived, and firm performances. It specifically focuses on SME local systems. The paper aims to provide an original contribution evaluating the role of four areas of innovation activities - training, technology, organization, ICT - that are likely to co-evolve and to be adopted in bundles by firms. In addition, following the recent stream of works in organizational innovations, we investigate the role of participative characteristics of industrial relations system as factor favouring the adoption of innovations, and indirectly enhancing productivity. We exploit rich survey data on innovation strategies merged with official balance sheets regarding firm performances, a rarity, and thus a main added value, in SME based studies.
The case study is represented by 192 manufacturing firms with at least 20 employees located in a province of Northern Italy, Reggio Emilia. The sample is highly representative of the entire population. Quantitative evidence is provided by exploiting two datasets: the first is derived from a direct survey carried out in 2005 collecting data on technological and organizational innovations, training, labour flexibility and industrial relations; the second is represented by a panel of official balance sheets data for the period 1998-2004.
The analysis is divided in two consequential main parts.
We first examine the drivers of different innovation/high performance strategies, specifically training, technological innovation, organisational innovation, ICT. Among the many factors and control variables investigated as stimulating innovations, we focus in particular on industrial relations, labour flexibility strategies, and firm's past economic trends.
Secondly, we exploit the aforementioned innovation indicators as potential drivers of firm productivity. Though the core of the analysis is based on a cross section framework the two related steps and the rich set of information allow coping with endogeneity issues.
Training activities and organizational changes show strong links with many industrial relations indicators, thus emerging as industrial relations driven innovations. The ICT innovation index results more influenced by firms past performances, than by industrial relations indicators, as technological innovation does.
The analysis about labour productivity drivers shows that training activities are the most relevant factors. Then, ranked consequently, technological innovation, organisational innovations and, finally, ICT also appear to impact on productivity levels. It is worth noting that the role of ICT emerges more robustly when endogeneity is specifically addressed using two stage procedures. Finally, the role of firm size seems here to be overshadowed by other drivers.