The employment impact of innovation in the heterogeneous universe of services was studied using data from the 2004–09 Uruguayan service innovation surveys. The empirical evidence shows that the impact of product innovation on employment is positive, while process innovation appears to have no effect. The effect varies according to the skill level of the labor force, across sectors, and the type of innovation strategy pursued by firms. Process innovation activities tend to substitute low-skilled jobs with higher-skilled jobs, while product innovation allows for more gains in efficiency in the production of new products with unskilled labor and no gains with the skilled labor force. Producing technology inhouse has in most cases no impact on employment, while the combined strategy of acquiring technology outside the firm and producing it in-house has strong positive effects. The results found for knowledge-intensive business services and small firms, with some exceptions, are similar to the ones found for whole sample.
Keywords: service sector, innovation, innovation strategies, firm size, knowledge intensity, employment quantity and quality, innovation surveys, Uruguay.
JEL codes: D2, J23, L8, O31, O33.