Employment-Innovation Nexus: A Theoretical Framework

This paper develops a theoretical model to explore how absorptive capacity influences the relation between innovation and employment. In particular, the aim of the model is to express all the possible forces underlying the transmission channels from the innovation process to the labor market and the importance of absorptive capacity in the employment-innovation relationship. Stated differently, absorptive capacity is a prerequisite for the effectiveness of innovation regarding employment outcomes. The empirical evidence within an international context supports and validates the predictions of our theoretical framework. Policy recommendations are provided for striking a balance between innovation processes and job creation.