Innovation and Self-Employment

Abstract

The chapter adds to the literature on innovation and employment by looking at the relationship between R&D investment and the rise of alternative work arrangements, particularly self-employment (SE). The chapter first looks at the emergence of nonstandard work, alternative work arrangements and self-employment. General trends of SE in Europe are considered. The contributions that have looked at SE in relation to innovation strategies are surprisingly limited. The empirical contribution is focused on the analysis of local labor markets in the UK (Travel-to-Work Areas, TTWAs), and considers the initial concentration of routinized and non-routinized jobs. The probability that an individual shifts from paid employment to either unemployment or self-employment over the period 2001–2013 as linked to changes in R&D investment in the TTWA is empirically accounted for. Results show that overall R&D has negligible effects on the probability of workers to become self-employed. R&D increases the probability of moving from unemployment to paid employment, especially in routinized areas, and reduces the permeability between routinized and non-routinized workers. Also, a non-negligible increase in the probability that a routinized worker becomes SE as a result of R&D increase is found in low routinized local labor markets but not in highly routinized areas. The chapter sheds new lights on the effect of R&D on employment and self-employment in areas with different degrees of routinization, and adds to the discussion on the more general raise of alternative work arrangements in Europe by disentangling the characteristics of self-employment as resulting from R&D investment.