By Friedrich Kreuser, Ayanda Hlatswayo, Carol Newman, & John Rand
The importance of resource reallocation between firms for aggregate growth is well-documented. Ensuring that the most productive firms can quickly expand their production and enable diffusion of technological knowledge across firms requires that production factors are mobile across firms. However, most studies of the relationship between factor mobility and productivity growth does not consider labor force heterogeneity beyond that of formal education (e.g entrepreneurial training and skills training within R&D and innovation activities). This distinction may be of particular importance. For the specific firm, “entrepreneurs/innovators” may bring within-firm externalities and could be considered an investment into the intangible capital of the firm thereby impacting on the future productivity of the firm. From a societal perspective, additional externalities may arise when R&D subsidies to one firm/sector, through the mobility of “entrepreneurs/innovators”, spillover from one firm/sector to another. Understanding the productivity effects of these entrepreneurs/innovators and their mobility will have important effects on how to target and design R&D incentive schemes. Using longitudinal linked employer-employee data coupled with detailed R&D incentive scheme information will enable us to rigorously analyze the effect of such policy intervention in the South African context.