Does flexible employment encourage innovation?

A high commitment to permanent employment contracts is associated with better innovative performance, according to new ESRC-funded research from the Open University Business School. But there is also evidence that looser employment ties are beneficial for innovation under certain circumstances. The research suggests that UK firms seek to retain traditional employment ties with selected employees those seen as key to innovation. Flexible employment practices, meanwhile, are focused on employees considered not directly involved in innovation: the fact that they can be hired and fired quickly may facilitate accelerated business change.

The researchers find that UK firms are becoming increasingly reliant on external knowledge resources in order to innovate. Staffing reductions (downsizing), flexible employment practices (such as short-term contracts) and hiving-off particular areas of activity (outsourcing) are all reducing...