Labor markets and innovation

Abstract

We examine the effects on the comparative R&D performance of firms of the different labor market conditions they face. The conditions we consider are the bargaining strength of the unions firms face and the contents of the bargain they negotiate. In particular we consider whether unions can bargain over when new technology is introduced. In the theoretical part of the paper we show that increased union strength can sometimes increase the possibility that a firm will successfully innovate, but that allowing a union to delay the introduction of new technology generally reduces a firm's R&D success. Empirical evidence from the United Kingdom shows that both union strength and the type of bargain that unions undertake have significant impacts on R&D spending. © 1989.