Human Capital Development and Innovation: The Case of Training in Small and Medium Sized Firms

This study examines the characteristics of small and medium-sized firms that perform training. It uses data taken from a recent Statistics Canada survey that permit firms' training decisions to be analyzed within the broader context of their many activities and strategies. The study finds strong evidence for the hypothesis that human capital development facilitated by training is complementary to innovation and technological change. Training incidence is found to be closely related to the importance that a firm gives to research and development, the use of new technologies, and numerous other strategies that are related to innovation. Training is also greater where a firm emphasizes quality and a comprehensive human-resource strategy. The results point to the inherent complementarity of technology and human resources policy.