This paper provides an account of the main approaches, debates and evidence in the literature on the role of workforce skills in the innovation process in developed economies. It draws on multiple sources including the innovation studies discipline, Human Capital theory, institutionalist labour market studies and the work organisation discipline. Extensive use is also made of official survey data to describe and quantify the diversity of skills and occupations involved in specific types of innovation activities.
The paper identifies a number of major findings in the literature. First, the predominant form of innovation in firms is incremental, and this points to the central role of the broader workforce in the generation, adaptation and diffusion of technical and organisational change. Second, achieving high academic standards within a country for the largest proportion of school students not only supports high participation in post school education and training but creates a workforce with greater potential to engage productively with innovation. Third, the extent to which a firm’s workforce actively engages in innovation is strongly determined by particular work organisation practices. Finally, there are large differences across advanced nations in workforce skill formation systems, especially for vocational skills. Such differences result in large disparities across nations in the share of their workforce with formal vocational qualifications, and in the level of these qualifications. The resulting differences in the quantity and quality of workforce skills are a major factor in determining the observed patterns of innovation and key aspects of economic performance.