Learning through urban labour pools: Collected worker experiences and innovation in services

Abstract

Knowledge-intensive services firms (KIS) depend on the skills and networks of employees, and tend to cluster in large-city regions. This raises the fundamental question of whether KIS 'learn through urban labour pools' in manners that have implications for innovation. To address it, a distinction is in this paper made between 'related variety' (RV) and 'unrelated variety' (URV) of work-life experiences collected by employees and combined in firms. The empirical analysis uses innovation survey and register data to demonstrate that higher levels of URV among staff in urban KIS inspire innovation activity, and increase the probability of innovation success. Outside cities, where KIS on average have more specialised knowledge bases, innovation responds negatively to URV and positively to RV. As a result, the sign, size and significance of urban-rural dividing lines in innovation propensities depend on whether firms have cultivated the skill profiles that are most conducive to innovation in their locations. Constraints faced specifically by KIS outside cities in this respect are identified and implications for policy drawn. Work with this paper has benefitted from discussions with Ron Boschma and Ingvild Jøranli. It utilizes the methodology originally developed by Tore Sandven of NIFU with funding from the Research Council of Norway (DEMOSREG program, contract number 209769). The usual disclaimers apply.

Collected worker experiences, knowledge management practices and service innovation in urban Norway

“…also Firgo & Mayerhofer, 2018). In line with this, Herstad et al (2019) found KIS benefitting for product innovation from combining a broad range of experience‐knowledge drawn specifically from the labour markets of large cities. This is consistent with the notion that innovation in the rapidly changing market environments of services demand bridging of different cognitive domains (Bugge, 2011; Jøranli, 2018; Pershina et al, 2019).…”

“…Given that non-conventional location choices suggest different business strategies and innovation models (e.g. Shearmur, 2015;Herstad et al, 2019), KIS located outside these urban labour market regions are excluded from the analysis.…”

“…Thus, we here simply assume that variety of experiences matter for innovation and leave open for the empirical analysis to address what is the requisite type. A fourth hypothesis is formulated on this basis: H4: Variety of collected worker experiences is positively associated with innovation knowledge-intensive services firms Even though the literature on absorptive capacity suggests that the type and amount of cognitive variety that firms effectively can assimilate and exploit depend on efforts made in this respect (Zahra and George, 2002;Cohen and Levinthal, 1990), research on collected worker experiences (Östbring et al, 2018;Herstad et al, 2019) and the antecedent literature on aggregate movements in the labour market (Boschma et al, 2009;Timmermans and Boschma, 2014; has insofar only occasionally (cf. Solheim et al, 2020: on R&D in the manufacturing industry) considered moderating effects of knowledge management practices (here understood as R&D and/or CSMs).…”

“…Drawing inspiration from management studies (e.g., Dokko et al, 2009; Mawdsley & Somaya, 2015) and evolutionary economic geography (Boschma & Frenken, 2011), efforts have in recent years been made to explore how organizational performance reflects experience‐knowledge “collected” (Östbring et al, 2018) by employees at prior places of employment (Boschma et al, 2009; Herstad et al, 2019; Solheim et al, 2020). In parallel, efforts have also been made to broaden the traditional focus of innovation research on R&D to consider impacts of other organizational practices implemented to stimulate creativity, foster learning and facilitate knowledge integration (Arundel et al, 2007; Donate & Sánchez de Pablo, 2015; Lorenz et al, 2016; Revilla & Rodríguez‐Prado, 2018).…”

Dynamics of regional diversification: a new approach using trademark data

“…This and vibrant labour markets is generally said to give enhanced access to knowledge spillovers (Fitjar & Rodríguez-Pose, 2020). Cities are also primary sites for knowledge-intensive services (Herstad et al, 2019). Market niches combined with variety of resources and connectivity through networks might give rise to firm-level heterogeneity (Eriksson & Lengyel, 2019).…”