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You, C.; Qiu, H.; Pi, Z.; Yu, M. Flexible Employment and Innovation in China. Encyclopedia. Available online: https://encyclopedia.pub/entry/45129 (accessed on 20 June 2024).
You C, Qiu H, Pi Z, Yu M. Flexible Employment and Innovation in China. Encyclopedia. Available at: https://encyclopedia.pub/entry/45129. Accessed June 20, 2024.
You, Chengde, Huishan Qiu, Zhuojie Pi, Mengyuan Yu. "Flexible Employment and Innovation in China" Encyclopedia, https://encyclopedia.pub/entry/45129 (accessed June 20, 2024).
You, C., Qiu, H., Pi, Z., & Yu, M. (2023, June 02). Flexible Employment and Innovation in China. In Encyclopedia. https://encyclopedia.pub/entry/45129
You, Chengde, et al. "Flexible Employment and Innovation in China." Encyclopedia. Web. 02 June, 2023.
Flexible Employment and Innovation in China
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Flexible Employment was born in industrialized developed countries as a form of employment resulting from the development of emerging industries and advances in information and communication technologies, with a concentration of highly skilled labor.

flexible employment innovation information technology capability

1. Introduction

Recently, a novel and viable alternative work option, namely flexible employment, have surfaced both in China and worldwide, particularly in the aftermath of the COVID-19 pandemic, as revealed by the International Labour Organization (ILO) in 2022. As reported by the Flexible Employment Development Report of China (2021), a vast number of flexible employees, totaling 200 million, are presently employed in sundry vocations such as network anchors, online car-hailing drivers, online platform meal delivery, courier delivery, domestic service, and designers. The surge in online shopping platforms has further heightened the need for emergency work-from-home opportunities. Notably, in the wake of the pandemic, several enterprises adopted flexible employment as a workable measure to mitigate the adverse impacts. Due to the rapid growth of e-commerce platforms, the digital economy, and technological advancement, flexible employment has become a pertinent subject of academic inquiry and policy formulation concerning national income and labor markets in China and globally. Additionally, with the ever-increasing focus on green innovation, it is vital to explore how flexible employment can be incorporated into environmentally friendly practices to reduce carbon footprint and promote sustainability.
Flexible Employment was born in industrialized developed countries as a form of employment resulting from the development of emerging industries and advances in information and communication technologies, with a concentration of highly skilled labor [1]. Flexible forms of employment, such as part-time and home-based employment, can give knowledge-intensive workers the freedom to innovate and be more productive. Academically, Atkinson introduced the notion of flexible employment, which he defined as necessary organizational flexibility to respond to market and technological changes, manage the workforce, and adopt diversified employment modes [2].
Academically, the empirical research on the multifaceted outcomes of flexible employment at various levels, including social, economic, macro, micro, corporate, and employee, presents a divergent array of results. While some scholars argue that flexible employment positively influences psychological contract, innovation tendency [3], job satisfaction, and loyalty [4], others contend that it dampens employee loyalty, high-risk tasks, and high-value innovation activities [5], and induces insecurity and conservative behavior among employees [6]. At the organizational level, academics have reported that flexible employment positively impacts enterprise revenues [7], corporate financial performance [8], labor productivity [9], enterprise absorptive capacity, and stock of knowledge [10]. Some opponents assert that flexible employment hinders enterprise innovation [11][12][13][14], particularly in the high-tech sector [15]. Some researchers have noted the adverse effect of flexible employment on inter-organizational cooperation [16][17] and dynamic environment [11]. In parallel, there is compelling evidence that the relationship between flexible employment and innovation is non-linear, represented by an inverted U-shaped curve [18][19][20], according to economists. Recent emphasis on innovation resides in the notion that enterprise innovation covers green and general innovation. The former is argued to facilitate profit maximization, and the latter enhances sustainability and environmental responsibility. Despite the phenomenal growth and expansion of flexible employment in China post-COVID-19, less is known about how flexible work affects input and output innovation among manufacturing enterprises in China. More so, only a few studies have focused on the internal and external factors mediating the above-noted relationship.
The relationship between labor market flexibility and innovation activities has attracted more and more attention in recent years. Still, the research on the effect of flexible employment on innovation has not been unified. Proponents argue that high layoff costs may hamper the adjustment needed for new production technologies [21]. By reducing the friction created by hiring and firing workers and lowering the cost of labor adjustment, companies are more motivated to try new, riskier, and more promising technologies [22][23]. However, opposing scholars believe technological change still requires security and stability. Labor market flexibility greatly reduces the likelihood of innovation in a conventional system with leading innovators and high barriers to entry [13].
Flexible employment has been identified as a potential driver of enterprise innovation, provided it is moderated by several factors, such as the use of trade unions, the political skills of the entrepreneur, and government supervision [24][25][26][27][28][29]. Crowley and Bourke state most reported evidence on the positive connection between flexible employment and enterprise innovation is limited to the service sector only and is rarely seen in manufacturing enterprises [25][26][27][28][29][30]. Moreover, several other external and internal moderators have been identified to affect the outcomes of flexible employment. For instance, the enterprise information technology capability (ITC) enables firms to establish efficient and swift systems for resource allocation, gain flexibility in adjusting production capacity, refine customer management and sales, and make the R&D platform more flexible and open [31][32]. Furthermore, ITC also advances cooperation efficiency within and across organizational boundaries, encourages the integration of external human resources and internal information and knowledge, promotes the acquisition and diffusion of information and expertise in knowledge innovation, and increases mutual innovation cooperation and cooperation efficiency [33][34]. Recent studies suggest that ITC has significantly influenced flexible employment during the COVID-19 pandemic [34]. ITC is crucial because it can reduce carbon footprint and enhance environmental performance. For example, cloud-based systems can reduce energy consumption and greenhouse gas emissions associated with on-premise data centers [35]. Additionally, telecommuting and videoconferencing can decrease commuting-related emissions, thereby mitigating the impact of transportation on the environment [36]. Despite the above, no published study has explored how ITC moderates the relationship between flexible employment and enterprise innovation input and output in China.
The inquiry into the effects of flexible employment necessitates scrutiny of government labor regulation policies, which have been identified as another potential determinant. Traditional labor laws and industry practices do not perceive flexible employees as conventional company affiliates, which has resulted in deficient labor rights, inadequate interest protection (e.g., training and tax services), and lack of social security benefits, e.g., industrial injury protection, medical insurance, and housing insurance [37]. Franceschi and Mariani contend that a more comprehensive investigation of the role of government labor regulations could clarify the impact of flexible employment on enterprise innovation [37]. In particular, government labor regulations that advocate for flexible employment can secure labor rights and interests for flexible employees, engendering a greater sense of security, identity, gain, and happiness at work and, as a result, higher levels of participation in innovative activities. Flexible employment characterized by distance can help improve environmental quality, less commuting time means less carbon footprint, and less traffic congestion can ease the pressure on urban governance, positively impacting carbon emissions [38]. The term “sustainable development” was first mentioned at the United Nations Conference on the Human Environment in 1972 and later gained recognition due to a report submitted to the United Nations by the World Commission on Environment and Development (WCED) in 1987, chaired by Norwegian Prime Minister Gro Harlem Brundtland (hereafter referred to as the Brundtland Report). The report presented the following definition: “Sustainable development is the development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs” (WCED, 1987:43), emphasizing the dynamic aspect of sustainability. The core idea is that all natural systems have limits, and human well-being requires living within those limits. Prior research has not fully explored the role of government labor regulations in the association between flexible employment and enterprise innovation, particularly in China. Hence, there is an untapped potential to examine how green innovation can be integrated into the government’s regulatory framework for flexible employment to foster sustainable development.

2. Flexible Employment: Background and Concept

China’s economic shift from a planned to a market economy between the latter half of the 20th and early 21st centuries necessitated policies promoting flexible employment. These policies aimed to support laid-off workers and manage the employment of college graduates. Technological advances and the expansion of internet-based industries fostered a range of flexible and diversified employment opportunities. In crafting these policies, sustainable and green enterprise development considerations were prioritized, reflecting China’s commitment to these crucial concerns, such as increasing employment, work diversity, and sustainable enterprise development. With the rapid growth of new internet technology and industries, new formats, and new business models, the continuous penetration of IT in various fields gave birth to flexible and diversified forms of employment.
Academically, Atkinson introduced the notion of flexible employment, which he defined as necessary organizational flexibility to respond to market and technological changes, manage the workforce, and adopt diversified employment modes [2]. Atkinson further identified two types of employees in a firm: core and peripheral. Core employees are critical resources that contribute to the competitive advantage of the firm, responsible for innovation and carrying unique knowledge and expertise of the organization. On the other hand, peripheral employees are loosely connected to the organization, and their relationship is primarily based on non-standard employment. Although peripheral employees may possess specific skills that the organization lacks, they are not expected to participate in innovation activities. They can be easily replaced to maintain the firm’s quantitative flexibility of human resources. However, Matusik and Hill challenged Atkinson’s core-peripheral model by arguing that quantitative flexibility can also be applied to the core areas [39]. According to them, many companies hire skilled temporary workers in the core areas to reduce structural costs and increase flexibility to cope with the rapidly changing market environment. With the development of the digital economy, the boundaries between core and peripheral employees are becoming increasingly blurred. The diversity and complexity of employment relations also make it challenging to define flexible employment clearly.
Below, Figure 1 illustrates the mapping of academic focus on flexible employment using the VOSviewer software. The search for “flexible employment” as the keyword in the Web of Science core highlights the research hotspots in the field of flexible employment. The software automatically clusters 62 keywords with a total frequency greater than five into five categories (as shown in the figure below, the same color is a class, and the size of the circle represents the total frequency). It can be seen that the existing literature on flexible employment primarily discusses the dimensions related to performance and job insecurity, lacking consideration of enterprise innovation.
Figure 1. Key terms co-occurrence clustering knowledge map.

3. Flexible Employment and Innovation

As previously mentioned, the literature regarding the impact of flexible employment on innovation presents mixed results that have left scholars and researchers uncertain. Many studies have investigated this topic, producing disparate and sometimes contradictory findings. For instance, some studies have found a positive relationship between flexible employment and innovation [11][24][26][27][30][40]. However, other research has shown a negative correlation [7][8][13][37][41][42], while some have found no significant relationship [43]. Other studies have found an inverted U-shaped relationship between the two variables [18][19][20] and differences in their relationship across different types of innovation activities [28][44][45]. Regardless, it is essential to note that sustainable and green enterprise development has significant implications for flexible employment and innovation. Enterprises must align their flexible employment practices with sustainable development goals, such as creating decent jobs, promoting social inclusion, and reducing inequalities. Additionally, green enterprise development can stimulate innovation by promoting resource efficiency, eco-innovation, and sustainable production processes. Nonetheless, in light of these divergent findings, the following section provides an overview of selected studies in this area.
Flexible employment proponents argue it positively impacts enterprises’ innovation capacity. Firstly, the influx of new talent provides a wealth of innovative ideas and opens up new social networks, thereby increasing the innovative output of enterprises. The lock-in effect that arises from long-term accumulation and habits incites conservative behavior and hesitation toward innovation activities among long-term employees [46]. Introducing new blood creates a sense of urgency among long-term employees, motivating them to participate in innovation activities and reducing internal rigidity. Higher labor mobility allows companies to replace inefficient labor while external personnel provide fresh ideas and knowledge, inspiring enterprises to explore new sustainable processes and solutions beyond existing knowledge reserves [31][47]. Secondly, flexible employment enables enterprises to utilize more skilled and efficient employees in innovation activities. For instance, Arvanitis found innovative firms that encouraged flexible work (hiring highly qualified professionals) to complete certain creative tasks [24]. Contract employees who are explicitly authorized to engage in innovation activities and exempt from complex organizational obligations can focus solely on innovation tasks [3]. This case is particularly true for those who choose flexible employment to pursue work autonomy [43]. As such, temporary occupation of external personnel can reduce the burden of time and resources on core employees [48] during innovation activities. Thirdly, by reducing the strict restrictions on labor contract termination, flexible employment can effectively promote labor-saving innovation in companies [49][50]. Fourthly, flexible employment methods encourage enterprises to explore risky new business areas. The low dismissal cost can significantly reduce the trial cost of strategic business projects and limit employees’ wage bargaining power based on innovative profits [51][52]. Finally, the flexible use of the labor force can protect long-term employees from the company’s environmental turbulence, especially in dynamic environments where temporary workers can effectively promote enterprise innovation in response to layoff decisions [52][53]. In this way, the adoption of flexible employment can promote sustainable development enterprise development by encouraging innovation and creativity while providing job security for employees.
On the other hand, some critics argue that enterprises should avoid utilizing a flexible labor force. Prominent economist Schumpeter highlights the importance of enterprise stability, continuous learning, and creating and preserving enterprise-specific knowledge. From this perspective, several experts provide reasons to oppose enterprises’ use of a highly flexible workforce. For one, high labor mobility may impede enterprises from acquiring specific knowledge and receiving a return on investment in training. As per the path dependence theory, improvements in employment flexibility could erode early-stage knowledge, which innovation relies upon, and the accumulation of employee training investment [54]. Employees may focus on general mastering skills, rather than enterprise-specific ones, during training and learning to enhance their competitiveness in the external labor market [55], thereby hindering enterprises’ innovation activities. This inhibitory effect is more pronounced in industries with high knowledge accumulation [14].
Furthermore, flexible employment hinders the organizational commitment required for innovation [8][42]. High flexibility reduces social cohesion, trust, and social capital [56]. While flexibility may bring new knowledge and ideas to enterprises, employees lack organizational identity, view themselves as outsiders, and conceal their tacit knowledge of innovation [57]. Most managers see flexible employment as reducing costs or coping with peak employment periods rather than as a source of new ideas. Moreover, loyalty problems caused by frequent job changes may result in the disclosure of trade secrets and technical knowledge, leading to increased control and management costs for enterprises [58]. Low dismissal costs reduce workers’ sense of security, making them conservative and disinclined to engage in high-risk and high-value innovation activities, less conducive to grassroots feedback [44]. Franceschi and Mariani explain that enterprises may opt to sacrifice future innovation benefits to secure a current low-cost labor force [38]. More so, Martínez-Sánchez notes that the negative impact of flexible employment on innovation is significant in high-tech enterprises [16]. Still, inter-organizational cooperation can mitigate this effect. These researchers view long-term employment as the most feasible approach to ensure a more loyal, productive, and innovative workforce in the long run, leading to sustainable development. At the same time, these scholars tend to agree that enterprises must carefully weigh the costs and benefits of employing a flexible workforce while considering their long-term sustainability and environmental impact.
In addition to the previously discussed literature, other works offer explanations for the effects of flexible employment on enterprise innovation beyond the positive and negative outcomes, such as the non-linear and insignificant effects. Kleinkrecht et al. and Wachsen and Blind discovered that flexible employment has a minor impact on enterprise innovation in highly competitive industries with low market entry barriers and generally available knowledge [12][13]. Zhou et al. study revealed that flexible employment benefits follower enterprises more than market leaders because the former has higher requirements for learning continuity and intellectual property protection [45]. Kok and Ligthart suggested that the increase in flexible employment promotes the innovation of new products, particularly in radical innovation [25], similar to Greece’s finding [28]. Altuzarra, Kato, and Zhou concluded that the relationship between flexible employment and enterprise innovation is not a simple linear one but rather an inverted “U” relationship [18][19]. Resource constraints and high internal costs make hiring informal employees an effective way for enterprises to supplement their limited human capital in innovation activities. However, excessive reliance on informal employees could be counterproductive for enterprises due to loyalty and organizational commitment issues.

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