Human Capital Endowments, Establishments' Practices, and Innovation: A Cross-Country Analysis of the Food and Beverage Industry

Abstract

This paper examines the role of human capital and establishments' practices in fostering food industry innovation across 13 low and middle-income countries. We estimate average marginal effects that also control for the variables traditionally recognized as affecting firm-level innovation, such as R&D expenditures. Our results suggest that establishments' human capital endowments, such as top managers' experience in the food industry and employees' education, alone may not be sufficient to achieve high levels of innovation. In fact, human capital endowments are found to be more effective in delivering innovation when they are combined with establishments' best practices such as providing employees slack time i.e., allocation of work-time on self-chosen projects of personal interests. Our key recommendation to food firms is to support employee slack time and human capital endowments as mutually reinforcing drivers of innovation.