Competencies, Innovation And Profitability Of Firms

This empirical study investigates the impact of competencies on firms' economic perfomance. A panel dataset of Finnish manufacturing firms is used to assess the effects of education and innovation on profitability. The differences between innovators and non-innovators, and between product- and process-innovators are also examined, to illuminate the interactions between innovation and skills. The results indicate that educational measures of competence are significantly associated with profitability. First, interactions between different levels and fields of education have the most important effects. For example, the positive effect of research skills is conditioned by a sufficient share of employees with general skills acquired in higher education. Second, profitability of innovating firms is determined differently from that of non-innovating firms, in particular, educational competencies are more important for innovators. Finally, the determinants of profitability. of product innovators differ from those of process innovators, i.e., different competencies complement different types of innovation.