The Impact of Employee Experience on Productivity and Firm Innovation: A Study of Italy’s Slowdown

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parma emiliaromagna italy europe piazza in the city of parma

[We’re pleased to welcome Francesco Daveri and Maria Laura Parisi. Francesco and Maria recently published an article in ILR Review entitled “Experience, Innovation, and Productivity: Empirical Evidence from Italy’s Slowdown.”]

Italy has been on a declining growth path well before the current crisis. We see this as the unfortunate combination of policy and managerial habits. On the policy side, a string of partial labor market reforms at the end of the 1990s  made inexperienced–hence less productive–workers enter the labor market. On the managerial side, a long-run feature of Italy’s corporate world is its seniority-based system of managerial selection. Evidence shows that senior conservative managers took advantage of cheap unskilled workers as a way to cut costs. This trend, however, also made a dent on the innovation and productivity performance of Italian companies.

The abstract for the paper:

The authors investigate whether the level of employee experience is good or bad for innovation and productivity. Using a sample of Italian manufacturing firms during the early 2000s, the authors find different results for managers’ versus workers’ experience. The ILR_72ppiRGB_powerpointeffect of managerial experience—proxied by age—on firm performance appears to depend on the type of firm; in innovative firms, having older managers and board members has a negative effect on innovation and productivity, while in non-innovative firms, the costs and benefits of having older managers appear to cancel each other out. For workers, the effect of having a high share of inexperienced (temporary) workers is unambiguously associated with low innovation and low productivity. These results also hold when endogenous regime switching is taken into consideration.

You can read “Experience, Innovation, and Productivity: Empirical Evidence from Italy’s Slowdown” from ILR Review free for the next two weeks by clicking here. Want to know about the latest research from ILR Review? Click here to sign up for e-alerts!

*Parma image credited to Mark Goebel (CC)

Francesco Daveri is Professor of Economic Policy at Università Cattolica del Sacro Cuore, Piacenza.

Maria Laura Parisi is Associate Professor of Economics at the University of Brescia.

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