Labor requirements and HR practice in Innovation: Implications for Local-Regional Workforces

Abstract

This paper proposes a way to measure the internal organizational capacity as an important element for innovation in the context of the creative industry at regional scale. In particular, this paper pays attention to the commitment-based HR practices as critical factors in shaping organizational competency and innovation. Existing studies on innovation at regional scale have identified a set of factors external to organizations, such as knowledge spillover, local or global collaboration, and proximity to research universities and institutions, as the main mechanisms of innovation. Presently, however, there is increasing evidence showing that the exclusive emphasis on external factors of innovation may in fact only capture one side of a continuum in which creativity and innovation are strongly influenced by internal organizational factors – i.e. internal skill pools and workplace culture (Lampel, Lant, and Shamsie, 2000; Collins and Smith, 2006). Building on this problem orientation, this paper investigates the labor requirement of the digital content industry, corresponding organizational strategies (human resource practices) and their contribution to innovation. The connection between the HR practice and its role on technological innovation has not been made clear in the existing economic geography or planning literature. Therefore, theories from human resource management (high performance human resource management) have been adapted to form the theoretic background and inform the measurement and quantitative modeling. The result of the logistic regression on 323 digital content industry firms cluster in Seoul, Korea indicates that the additive effect of various commitment-based HR practices including rigorous hiring of workers with high skills and educational attainments and worker retention is positively related to innovation, whereas the evidence for the contribution of local or international collaborations is vague at best. The public policy implication of this finding is that micro level organizational human resource strategies are, in fact, an integral part of regional workforce development and long term economic growth, which may seem trivially obvious but is something that too often we seem to overlook. These research findings lend support to policy programs targeting new employment and longer retention (such as wage subsidies), as these programs help firms exercise commitment-based HR practices.