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The relation between human capital and innovation at a firm level A study on a sample of European firms

In this paper we try to verify if the human capital “embodied” in the workforce has in itself (being constant the effort in R&D) a relation with the innovative capabilities of the firm. We also investigate if this link is linear or it is better expressed by non-linear expressions and if there is an interaction, and of what sign, between the education of the workforce and the R&D effort of the firm. Besides, we verify if the relationship between human capital and innovation has different strength in different countries. The empirical analysis is performed on data coming from a survey (EFIGE) run in seven European countries concerning the period 2007-2009. Linear regression models, also with instrumental variables, probit and tobit are the utilized statistical techniques. The results show a statistically significant and positive relationship between the ratio of graduated employees and the percentage of turnover from innovative products, being constant the share of personnel employed in R&D. This relationship appears not linear, as the quadratic terms are negative and significant. Besides, the intensity of this link is higher when firm’s R&D intensity increases. We also find some significant differences n the magnitude of the human capital/innovation link across different countries.