Spoils of Innovation? Employment effects of R&D and knowledge spillovers in Finland

This paper investigates the relationship between innovation and employment by analyzing the factors that drive job creation processes and particularly by scrutinizing the role of innovation on the skill structure of regional labor demand. The study utilizes Finnish regional innovation (proxied with R&D expenditures) and employment data for 2000–2013. The results show statistically significant positive employment effects from local innovation activities and knowledge spillovers from other regions only on the demand for high-skilled employees. For low-skilled employees, the employment effects of local innovation activities are significantly negative, while there is no impact from knowledge spillovers from other regions. These effects are robust also for different lag structures. The findings are significant in terms of their policy implications for supporting employment; Finnish innovation policy should consider the negative impacts of innovation on low-skilled employees more explicitly.