Labour productivity and innovation performance: The importance of internal labour flexibility practices

Abstract

This article develops and examines the idea that internal labour flexibility practices are beneficial for labour productivity and innovation performance of companies. This is tested in two studies using unique company level datasets. In Study 1, results obtained from 377 independent companies revealed that internal labour flexibility practices are positively related to objective labour productivity and its growth in the year following, also when controlled for objective labour productivity and objective external labour flexibility from the year before. In Study 2, results obtained from 4271 companies indicated that internal labour flexibility practices were positively related to product innovation and labour productivity. Findings suggest that internal labour flexibility practices benefit both labour productivity and innovation performance of companies. If innovation and labour productivity are considered key to long-term survival, firms and policymakers should consider internal labour flexibility practices.

The effect of strategic flexibility configurations on product innovation

“…Here, for instance, Chen et al (2014) found that HR management practices affect product innovation performance of the company. Preenen et al (2017) focus on internal labor flexibility and confirmed the relationship between internal labor flexibility and product innovation. A possible explanation could be an early study of Arvanitis (2005), who argues that product innovation requires highly-skilled technicians and scientists, while companies sometimes hire high-skilled personnel temporarily for certain tasks, from other institutions.…”

Conceiving, designing and trailing a short‐form measure of job quality: a proof‐of‐concept study

“…The first principle is that job quality is constituted by a set of work features that have the capability of enhancing or diminishing worker well-being. Research evidence suggests that good jobs are also good for employers in that they are associated with increased productivity, lower absenteeism and longer job tenure (Preenen et al, 2017). For example, greater employee involvement in decision making has been shown to deliver bottom-line benefits to business (Appelbaum et al, 2000).…”

Labour flexibility, capital structure and enterprise performance

“…Numerical flexibility can be enhanced through various practices, such as the use of fixed-term workers, temporary workers or agency workers. Since these practices require firms to interact with external labour markets, they are often referred to as "external numerical flexibility" (Kalleberg, 2001;Preenen et al, 2017). However, firms can also adjust the volume of labour through flexible working hour arrangements for existing workers, such as voluntary part-time work, overtime and weekend and shift work.…”