Published 21 October 2016

Knowledge Spill Over and Economic Growth

– The relation between productivity and recruitment of key competences among small and medium sized companies in Sweden

This report suggests that recruitment of key competencies is important for the productivity of small and medium sized firms in Sweden. The small and medium sized firms that are able to recruit professionals from more established firms, such as multinational firms or firms participating in foreign trade, experience particularly strong productivity growth post-recruitment.

New recruits can be expected to possess knowledge and previous experiences that are im­portant for the new employer. Through recruitment the productivity of other workers and of the firm itself could therefore be promoted. The recruitment of managers and profess­ionals in small and medium sized firms could be expected to be important and they are consequently in focus in this report. These groups of workers can be expected to possess important knowledge that more easily can make a difference as they are recruited to in­fluential positions in smaller firms. In the report, we also pay close attention to the back­ground of the recruits, for example, by analysing whether they arrive from multi­national or domestic firms.

We analyse the association between newly recruited key personnel and the firms’ subsequent productivity and how the association varies depending on the position and previous experience of the recruit, using Swedish data across the period 2001–2010.

Results

We find no clear link between recruiting managers and productivity. Instead, our results suggest other personnel, especially professionals, to be associated with increased produc­tivity.

The results suggest that a small or medium sized firm hiring a professional can be expected to experience 0,3 percent higher productivity in the next year. The corresponding associa­tion for firms hiring other workers is 0,1 percent. When we take the workers’ previous work experiences into consideration, we find professionals arriving from enterprise groups, multinational firms and foreign trade to be particularly important. For instance, a pro­fessional from a multinational or foreign-trading firm is associated with a one-percentage increase in the new employer’s productivity, i.e. a more than three-fold as large increase as in the baseline case.

In summary, we find that recently recruited professionals seem to contribute more to the firms’ productivity than do other recruits. The background of the recruit matters and the small and medium sized firms that are able to recruit from established firms appear to experience a particularly strong increase in productivity.

Conclusions

The report suggests that recruiting professionals is important for the productivity of small and medium sized firms in Sweden. Recruiting professionals from established firms seems to be particularly important. Since the small and medium sized firms in Sweden account for a large share of the net job creation, it is important to consider how their recruitment of professionals can be facilitated.

Title
Knowledge Spill Over and Economic Growth – The relation between productivity and recruitment of key competences among small and medium sized companies in Sweden

Serial number
PM 2016:12

Reference number
2014/253

Download the report in SwedishPDF