A hidden source of innovation? : revisiting the impact of initial vocational training on technological innovation

While an increasing number of studies postulate that vocational education and training (VET) activities have a positive impact on the innovative capacity of training companies, empirical evidence on the topic remains contradictory. This study exploits establishment data from a representative survey of German companies to estimate the relationship between firms' participation in initial VET and their innovation outcomes. Our results show that the direct effects of initial VET on technological innovation in small and mediumsized enterprises (SMEs) are on average quite weak. If at all, a training firm's initial VET activities are associated with production innovation activities and not with process innovation. Larger effects can only be observed in case of microenterprises with fewer than ten employees. In these firms, initial VET is associated with a higher probability of (local) new-to-market product innovation if it is accompanied by changes in organizational processes that support individual learning and knowledge creation. We conclude from this finding that the knowledge diffusion function of the VET system primarily holds relevance for the smallest of the training companies and that initial VET is only positively related to technological innovation when it goes along with organizational learning in the training company.