Abstract
This article evaluates the effect of the Argentinean Support Program for Organizational Change on employment and wages. The program aimed at increasing small and medium-sized enterprises’ competitiveness by co-financing technical assistance to support process and product innovation activities. Although employment is not usually the main objective of these types of programs, they are always implemented assuming that they create—or at least do not destroy—employment opportunities. We use a unique data set with information for the population of firms in Argentina from 1996 to 2008 to test this important assumption. Using a combination of fixed effects and matching, we find that both process and product innovation support increased employment and wages, with a higher impact on employment. In addition, we find that product innovation support had a larger effect on wages than process innovation support.
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Notes
Approximately 50 percent of the program was financed by a loan from the Inter-American Development Bank to the Argentine Government.
In December 2001, President De la Rua resigned, and between December 2001 and January 2002, five presidents were in charge of the government. During those months, Argentina changed its monetary regime and declared the default of its debt. In 2002, the economy contracted by 10.8 %. After that contraction, the economy grew at an average rate of 8 % between 2003 and 2008.
Most of the firms received support only once; only 19 firms received support more than once.
We consider firms that were active in 1998 because our estimation strategy requires that all the firms are at the moment in which we estimate the propensity score, and we estimate the propensity score the year before the beneficiaries receive support.
This approach was used in several evaluations of productive development programs; see, for example, Arráiz et al. (2012).
The program was effective in increasing firm’s competitiveness. We have two competitiveness measures available in our data set: firms’ survival and exporting probability. Table 9 in the “Appendix” shows the impact of each type of support on these variables. To estimate these effects, we use linear probability models—i.e., we estimate Eq. (4) for each type of support considering two binary dependent variables: a dummy for survival and a dummy for exporters. These linear probability models allow us to control for unobserved time-invariant firm characteristics that can affect the decision of participating in the program and the performance in terms of survival and exports. Both process and product innovations support increased exporting and survival probabilities. However, the impact of product innovation support is higher. This result is consistent with the fact that firms with new or upgraded products can compete more efficiently in both the local and international market.
This finding is similar to the findings for the survival and exporting probabilities in Table 9. These findings are also consistent with the high satisfaction of the beneficiaries with the program resulted from a satisfaction survey implemented by the program executing unit and with the fact that several firms that were first time users continued using professional services after their participation in the program.
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Acknowledgments
We thank Gustavo Crespi, Lucas Figal, Guido Imbens, Andres Lopez, Ezequiel Tacsir, the editor, two anonymous referees, and participants in the “Mind the Gap 2011” and MEIDE conferences for useful comments. The usual disclaimers apply. This paper is part of the Inter-American Development Bank Project “Employment Generation, Firm Size and Innovation in Latin American: The Microeconomic Evidence.” The views expressed in this paper are those of the authors and do not represent those of the Inter-American Development Bank or the Argentinean Ministry of Labor, Employment, and Social Security.
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Castillo, V., Maffioli, A., Rojo, S. et al. The effect of innovation policy on SMEs’ employment and wages in Argentina. Small Bus Econ 42, 387–406 (2014). https://doi.org/10.1007/s11187-013-9485-9
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DOI: https://doi.org/10.1007/s11187-013-9485-9