Labour Flexibility and Innovation, Complementary or Concurrent Strategies? A Review of the Literature

The European strategy for growth has a two-fold aim: to become an innovative union and to enhance labour flexibility. Yet, few have addressed the question of whether these two strategies are compatible or concurrent. Through a review of the literature, this article addresses this question by focusing on different types of labour flexibility (functional, contractual and financial), and two types of innovation outcomes: employee-driven innovation (EDI) and organizational innovativeness. Using insights from different research traditions, sound evidence is found for a positive relation between different forms of functional flexibility and both EDI and organizational innovation. This is nevertheless not so for contractual and financial flexibility. Indications are found that these types of labour flexibility are potentially negative for both EDI and organizational innovation. Yet, trends in the European labour market and EU backed policies do not focus on enhancing functional flexibility, but rather aim to increase contractual and financial flexibility