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This paper asks two main research questions. First, what is the relationship between firm-level innovation and export performance? Second, what is the direct effect of innovation on employment, while accounting for the indirect innovation-export link? I use a novel longitudinal administrative dataset of all firms registered to pay tax in South Africa, over 2010–2016. The first main result suggests a positive and significant relationship between innovation and export performance. Second, the fixed effects results show that direct innovation positively impacts employment growth in manufacturing firms, however, R&D-induced exports – the indirect channel – negatively impacts employment growth. This points to the notion that productivity enhancements necessary for South African manufacturing exporters to compete internationally might promote labor-saving innovations. Nonetheless, the overall innovation effect on firm employment growth is positive. [ABSTRACT FROM AUTHOR]

Several studies have pointed out that manufacturing wages are relatively higher in African countries than in other countries at similar levels of development, and that this contributes to the continent's lower levels of manufacturing competitiveness. This paper derives unit labor costs (ULCs)—average wages relative to productivity—for two‐digit manufacturing sectors across a sample of 79 developed and developing countries, including 13 African countries, over the 1990–2015 period. We benchmark the ULCs to China and estimate the relationship between relative ULCs and manufacturing sector investment rates and export performance. We find that relative ULCs have a smaller association with exports in Africa relative to other developing regions. There is some evidence that investment responds to changes in relative ULCs in Africa; however, the estimated effects are smaller than in the full sample. Further, we find that for Africa, the level of labor productivity has a quantitatively stronger and more robust association with manufacturing performance than the level of real wages. The results have important implications for industrial policy in African countries. [ABSTRACT FROM AUTHOR]