while enterprises without fresh innovation, on average, have less compensatory opportunities for employment growth and thus employ in a manner far more sensitive to labor costs. Under this hypothesis, and in view of our finding that innovative firms hire a larger share of unskilled workers than non-innovative firms, innovation might ease concerns related to the low-wage trap for unskilled labor.

# **_4.3 Access to export markets, finance, communications and other essential business services are key additional correlates of employment growth_**

In addition to innovation as a source of inclusive growth, there are a number of other significant correlates of employment growth that have strong policy implications – including support for the competition policy mandate to assure access to essential business services for entering markets and expanding outputs. Table 2 reports the statistically significant importance for employment growth over our most inclusive sample of access to: finance (investment capital from both local banks and foreign borrowing), communications (enterprises using the internet grow significantly faster), export markets, and other essential business services such as ISO management certification and formal worker training programs.<sup>28</sup> In addition, having less government ownership and having greater access to global know-how through foreign ownership are both positive correlates of enterprise employment growth. The same relationships hold in our non-OECD developing countries sample, as reported in table 3, with the additional significance of the variable indicating that the firm is part of a business association, which had no statistically significant relationship with enterprise employment growth across all countries.

Notable policy implications also seem to be indicated by some significant differences between innovators and non-innovators (tables 4 and 5), and among firms in various age and size categories. One striking example is that ISO certification is associated with more than 2.1 and 1.8 percentage points of added employment growth for product and process innovators respectively in non-OECD developing countries, while it is statistically unrelated to employment growth for non-innovators. The large firms (with over 200 employees) in both the all-country and non-OECD country samples are different from smaller firms in that while their employment growth is significantly affected, on average, by their product innovations, it is not significantly related to their process innovations or their TFP. In addition, large firms‘ employment growth is unrelated to internet use, ISO certification, use of formal job training programs, membership in a business association and incorporation status. The young firms are different on average since their employment growth rates are not significantly related to process innovation (though they are significantly related to TFP and product innovation), ISO certification, membership in a business association, and their incorporation status. In contrast, internet use and formal job

> 28 ISO management certification refers to a family of internationally recognized management quality standards. The certification status of surveyed establishments is ascertained directly in the Enterprise Surveys. Formal training programs refer to ―beyond the job‖ training opportunities offered to employees of the respondent establishment. Table 1c contains a detailed listing of the definition of these and other enterprise-level business environment indicators used in this study.

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