Effects of Organizational Workforce Flexibility on Product Innovation Outcomes

The purpose of this study is determine whether and how the flexibility of the workforce is affecting product innovation outcomes of firms responding to their changing environments. Drawing on the resource-based theory of the firm we contribute to the literature distinguishing human resource characteristics from human resource management practices and subdividing the characteristics into functional and numerical flexibility of the workforce. Accordingly, we hypothesized that both types of flexibility influence product innovation outcomes but in different ways. A large-scale sample of 407 Dutch firms across various manufacturing goods and business services industries was used to test the hypotheses. The results show that functional flexibility influences radical product innovation, where external numerical flexibility influences both incremental and radical product innovation. This implies that managers of manufacturing goods as well as service firms may use training and education as part of the functional flexibility to create a workforce deployed to increase radical product innovation outcomes. Similarly, fixedterm contracts as part of the external numerical flexibility of the workforce increase both radical and incremental product innovation. This study contributes to the production innovation literature with taking this human resource perspective on flexibility in product innovation that is complementary to the new product or new product development perspective on product innovation.