This paper sheds light on the relationship between innovation, human capital endowment and upgrading, organisational capital (OC) and labour productivity. In addition to assessing correlations, it uses a Heckman selection model to address causal links and to account for the ways in which skills and investment in R&D affect the probability of innovating. The analysis finds that innovative output, the proportion of OC-related workers, investment in training (especially in informal training) and physical capital intensity are positively and significantly related to productivity. In most estimates ICT skills, cognitive skills and the presence of highly skilled workers in an industry also emerge as having a significant and positive relationship with productivity. ICT skills further appear to indirectly shape productivity, through a positive relationship with innovation.

This paper was approved and declassified by written procedure by the Committee on Industry, Innovation and Entrepreneurship (CIIE) on 16 June 2021 and prepared for publication by the OECD Secretariat.This publication contributes to the OECD's Artificial Intelligence in Work, Innovation, Productivity and Skills (AI-WIPS) programme, which provides policymakers with new evidence and analysis to keep abreast of the fast-evolving changes in AI capabilities and diffusion and their implications for the world of work. The programme aims to help ensure that adoption of AI in the world of work is effective, beneficial to all, people-centred and accepted by the population at large. AI-

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