Effects of Product and Process Innovation on Employment in Indian Innovative Firms

29 Pages Posted: 4 Mar 2019

See all articles by Ramandeep Kaur

Ramandeep Kaur

Punjabi University, Department of Economics, Students

Sangeeta Nagaich

Punjabi University-Department of Economics

Date Written: November 17, 2018


Schumpeter defined innovation as new goods which do not exist in the market, a new production method, a new market or raw material source, a new field of business, a new financial method or a new organization style. The innovation is of generally two types, specifically product innovation & process innovation and they are important source of increasing productivity and economic growth. Although it is generally accepted that innovation leads to the rise in the efficiency and productivity of capital, it can also be said that it increases the productivity of labour force as well. But on the other hand, distinguished economists John Maynard Keynes and Wassily Leontief visualized an instance, when the non-natural intelligence would generate technological unemployment. In their analysis, labor would become less essential and workers would be substituted by machines. The predictions of Keynes and Leontief holds true, specifically for developing nations, as various studies put forward the fact that the technological innovations lead to the destruction of jobs rather than job creation and on the contrary, in the economically advanced nations it generally leads to the creation of new jobs. Further, the emergence of Industrial Revolution had also triggered the frequent fear, that the technological changes will bring forth mass unemployment with them. So, the relationship between innovation and employment is very complex and has become the topic of debate among the galaxy of intellectuals. This present piece of work will try to explore the direct impact of innovation activity, taking into consideration both Research & Development expenditures and embodied technological change (ETC) on the firm level employment in different innovation-intensive sectors in India. At the firm’s level, product innovation has positive impact on the employment, while the process innovation has negative impact on the employment. Therefore, the need of an hour is to build up such innovation system which will produce long-term employment and growth opportunities.

Keywords: Employment, innovation, product innovation, process innovation, research and development, embodied technological change

Suggested Citation

Kaur, Ramandeep and Nagaich, Sangeeta, Effects of Product and Process Innovation on Employment in Indian Innovative Firms (November 17, 2018). Available at SSRN: https://ssrn.com/abstract=3334819 or http://dx.doi.org/10.2139/ssrn.3334819

Ramandeep Kaur (Contact Author)

Punjabi University, Department of Economics, Students ( email )


Sangeeta Nagaich

Punjabi University-Department of Economics ( email )

Patiala, IN Punjab 147002

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