Scale Effects in Workplace Innovation

Workplace innovation is defined as the implementation of new and combined interventions in work organisation, HRM and supportive technologies, and strategies to improve performance of organisations and quality of jobs. Previous research indicated a positive relationship between workplace innovation and organisational performance. Through OLS regression we empirically tested whether firm size moderates the relationship between workplace innovation and organisational performance. We used a sample of 1,132 Dutch firms. Our database consist of variables from The Netherlands Employers Work Survey (NEWS; 2010) and balance sheet statistics for non-financial firms (NFO; 2010 and 2011) collected by Statistics Netherlands (CBS). Organisational performance is operationalized as the labour productivity growth, employment growth, and growth of return on capital. Firms are categorised into four size classes: micro firms (≤9 employees), small and medium firms (10-≤249 employees) and large firms (≥250 employees). Workplace innovation is measured with four sub-constructs: strategic orientation, flexible work, smart organising and product-market improvement. We find a combined effect of firm size and strategic orientation on labour productivity growth. In terms of labour productivity growth strategic orientation is significant more beneficial for micro firms compared to small and medium sized firms. Additionally,  the result show a combined effect of firm size and product-market improvement on labour productivity growth. For micro sized firms product-market improvement seems to have a negative effect on labour productivity growth, whereas it has a positive effect on labour productivity growth for small and medium and large firms. Furthermore, we find an interaction effect for firm size and product-market improvement on employment growth. For large firms product-market improvement has a negative effect on employment growth, however it has a positive effect on employment growth for micro and small and medium firms. This indicates scale effects exist and policy measures aimed at stimulating workplace innovation should differentiate between size classes.