IT is Never too Late for Changes? Analysing the Relationship Between Process Innovation, IT and Older Workers

The key role of information technologies (IT) for productivity and growth is meanwhile undisputed. As so-called 'general purpose technologies' they enable product as well as process innovation which in turn may result in positive productivity effects and ensure firms' long-run competitiveness. While on the one hand IT offer firms huge potentials for reshaping business processes and for supporting their innovation activities, firms are on the other hand faced to an ageing workforce. The probability and frequency of IT and software use are not the same for all age groups. In 2008, 28 percent of the individuals from 55 to 64 years used a computer at their workplace, whereas more than 50 percent of the people in each of the age groups between 25 and 54 years did so. This might be partly due to older people working in occupations without IT adoption. However, the lower level of IT use by older workers is rather caused by their IT skills, as suggested by several empirical studies, finding that older workers have lower IT skills compared to younger workers and a lower level of mastery of equipment and software. This paper provides empirical evidence on the question whether firms' IT-enabled innovative activity is affected by the age structure of the workforce. We find that the probability of realising process innovations is positively related to the IT-intensity of the firms supporting the hypothesis of the innovation-enabling character of IT. However, the share of employees older than 49 is negatively and significantly related to firms' innovation activities. This is underpinned by a negative relationship between the interaction of this age group and the IT-intensity and process innovations. IT-specific training for older workers, by contrast, is conducive to the probability of process innovation. This result implies that not older workers in general impede firms' innovation capabilities, but older workers who lack the appropriate IT skills.

Bertschek, Irene and Jenny Meyer (2010), IT is Never too Late for Changes? Analysing the Relationship Between Process Innovation, IT and Older Workers, ZEW Discussion Paper No. 10-053, Mannheim.