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This paper examines the impact of innovation on employment growth in innovating small and medium enterprises using a quantile regression approach. The key findings are that innovation has a positive effect on employment in both growing and shrinking firms. The impact of innovation on employee headcounts is much stronger in companies that are already experiencing strong growth than in their slower growing or shrinking counterparts. Thus, positive employment effects of innovations are not restricted to narrow segments of the economy. Economic policy aimed at bolstering the innovative strength of firms is thus a strong encouragement to employment on a broad basis.
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