Direct and Indirect Employee Voice and Firm Innovation in Small and Medium Firms

Abstract

This study adopts an integrated approach to employee voice (EV) and analyses the impacts of direct and indirect EV mechanisms on firm innovation in small and medium-sized firms separately. It also proposes a new categorization for direct EV, by distinguishing between verbal and written mechanisms, allowing us to take the level of formality of different EV mechanisms into account. The analysis of 17,890 European firms shows that verbal, written and indirect EV mechanisms are all positively related to a higher propensity of firm innovation in both small and medium firms. However, for verbal EV mechanisms the relationship is significantly stronger for small firms than medium firms. The results also reveal that medium firms derive higher benefit than small firms while combining and balancing EV mechanisms with different levels of formalization (i.e. verbal and indirect voice). However, the former also suffers from excessive formalization of employees’ involvement in the innovation process (e.g. through written and indirect voice). Overall, this study supports recent calls for the need to adopt an integrated, pluralistic approach to EV and has important implications for EV research in small and medium firms.