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MeasuresInnovation. Innovation was measured by means of an index, composed out of the weighted sum of four dichotomous (0/1) outcome variables (weights mentioned between brackets): innovation w.r.t the supporting processes (e.g. administration) (1), innovation w.r.t. the production process (2), improvement of existing products or services (4) and development of new products or services (8). The index ranges from 0 to 15, representing ‘non-innovators’ on one end of the innovation continuum and ‘full innovators’ on the other. The score thus calculated allows us to capture both the nature or type (focus on process or product/service) and the scope (incremental or radical changes, i.e. refinement of existing products/services versus the production of new products/services) of the innovation activities in a single measure. The higher the score on the index, the more fundamental or transformational the innovation activity has been.Employee human capital. The human capital of employees is measured by the percentage of highly skilled employees (i.e. having a degree of formal, higher education of at least bachelor level). We believe this measure to be a good proxy for the amount and level of employee knowledge.
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