Strong demographic headwinds have motivated Japan to strengthen its economy by fostering innovation. This paper draws on a panel of business enterprises operating in 33 industries in Japan to examine how research and development (R&D) activities affect employment. Our findings suggest that employment gains are associated with innovation, both at the aggregate level and within groups of major industries. The positive impact of technological advancement is more pronounced in the manufacturing sector. The results reveal heterogeneous patterns of the key determinants of employment growth based on the level of industries' routine intensity, but they accord well with the compensation theory concerning the connection between innovation and job creation. These results will be of interest for policymakers to design targeted economic strategies by supporting technological development in Japan and could also serve as a compass for other countries with similar workforce structures and macroeconomic characteristics.

This paper models the disclosure of knowledge via licensing to outsiders or fringe …rms as a threat, useful in ensuring …rms keep their commitments. We show that …rms holding intellectual property are better able to enforce agreements than …rms that don't. In markets requiring innovation to make a product, IP disclosure presents a more powerful threat than entry by the punishing …rm alone. Occasionally, a punishing …rm won't be able to translate its intellectual property into a full-blown product, making it impossible for it to enter the cheating …rm's market and punish. Even if it can't make a product itself, the punishing …rm can always credibly threaten to license the intellectual property it has on hand to someone else. With this intellectual property as a springboard, chances are at least one fringe …rm will be able to do the translation, make the product and enter the cheating …rm's market. In short, the potential for licensing increases the likelihood of punishment for uncooperative behavior. In the model, …rms contract explicitly to exchange knowledge and tacitly to coordinate the introduction of innovations to the marketplace. We …nd conditions under which …rms can self-enforce both agreements. The enforcement conditions are weaker when (1) …rms possess knowledge and (2) knowledge is easily transferable to other …rms. The disclosure threat has implications for antitrust law generally, which are considered.

This paper models the disclosure of knowledge via licensing to outsiders or fringe …rms as a threat, useful in ensuring …rms keep their commitments. We show that …rms holding intellectual property are better able to enforce agreements than …rms that don't. In markets requiring innovation to make a product, IP disclosure presents a more powerful threat than entry by the punishing …rm alone. Occasionally, a punishing …rm won't be able to translate its intellectual property into a full-blown product, making it impossible for it to enter the cheating …rm's market and punish. Even if it can't make a product itself, the punishing …rm can always credibly threaten to license the intellectual property it has on hand to someone else. With this intellectual property as a springboard, chances are at least one fringe …rm will be able to do the translation, make the product and enter the cheating …rm's market. In short, the potential for licensing increases the likelihood of punishment for uncooperative behavior. In the model, …rms contract explicitly to exchange knowledge and tacitly to coordinate the introduction of innovations to the marketplace. We …nd conditions under which …rms can self-enforce both agreements. The enforcement conditions are weaker when (1) …rms possess knowledge and (2) knowledge is easily transferable to other …rms. The disclosure threat has implications for antitrust law generally, which are considered.