NEW RESEARCH | R&D investment in small businesses creates more and better jobs

Companies that invest in research, development and new technologies not only create more jobs – but also better and more skilled jobs. This is according to new research on how business investment affects the labor market in Sweden.

– We clearly see that in regions where companies invest in research and development (R&D), employment increases, and more highly skilled jobs requiring post-secondary education are created, says Yifei Wang, University of Gothenburg.

Investments strengthen both businesses and workers

Her doctoral thesis is based on extensive quantitative data from Swedish companies, including Statistics Sweden’s R&D survey. The results show that investments in R&D and machinery not only affect companies – but also employees.

– Those who work in investing companies often enjoy better salary progression and career advancement. This suggests that investment also acts as a catalyst for learning – employees develop and become more competitive in the labor market.

Thus, when companies invest in new technologies and knowledge, a double effect is created: job growth in the region and increased opportunities for individuals.

Large regional differences

But not all regions benefit equally. Yifei Wang’s research shows that the positive effects of investment are concentrated in metropolitan areas such as Stockholm and Gothenburg, while rural areas find it harder to benefit.

– There is a risk that investments reinforce regional inequalities. Cities already have a highly skilled workforce and strong business networks. In rural areas, the skills and infrastructure needed to reap the benefits are often lacking, she explains.

To reduce the gaps, Yifei Wang suggests that policymakers work more on the basis of local needs – that different regions receive different types of support based on their circumstances.

Local recruitment brings unexpected benefits

A surprising finding in the research is the importance of local labor. Companies that recruit from their own region often perform better than those that bring in workers from outside.

– I didn’t think it would matter where employees come from, but it does. Local recruits bring not only formal education, but also networks, contacts and an understanding of the local culture. This proves to be a valuable asset, says Yifei Wang.

She concludes that while investment is a powerful engine for growth, it is not enough to create long-term sustainable effects.

– For the investments to be truly beneficial, they also require investment in skills development and lifelong learning. Otherwise, investments risk becoming isolated projects that are not anchored in the local labor market.

Contact yifei.wang@gu.se

More about the thesis
Yifei Wang will defend her thesis on November 28 at the University of Gothenburg R&D and Machinery in Regions. lnvestment and Labor Market Dynamics .