Do Institutions in Vocational Education Foster Knowledge Diffusion and Innovation?

The effect of vocational education and innovation of companies has been a topic in the economic literature for more than three decades. While several empirical and theoretical papers establish a negative effect of vocational education on innovation of companies, recent papers show that the vocational education can foster innovation. Researchers that identify a negative effect argue that vocational education operates with old, outdated technologies of single firms. On the contrary researchers that identify a positive effect, argue that vocational education, especially those that German-speaking countries apply, comprises several institutions that foster the diffusion of knowledge. The two views on vocational education show that researchers use different conceptualizations of vocational education to explain its effect on innovation.

The effect of vocational education on innovation depends on its potential to initiate and maintain knowledge diffusion among companies. While vocational education that a single firm organizes is unlikely to initiate knowledge diffusion, vocational education that multiple firms organize might have the potential to do so. Coordinated actions of multiple companies can have strong effects on innovation (e.g. Carlson and Stankiewicz 1996, Dosi 1982 Freeman 1988, Lynn et al. 1996, Sahal 1985, Watkins et al. 2015, Carlsson and Stankiewicz 1991). The involvement of multiple firms requires that vocational education has a governance structure that coordinates collective action of multiple firms. Carlsson and Stankiewicz (1991) suggest that such a governance structure consist of two layers. An organization that coordinates collective action is the first layer while companies that provide inputs for the coordinating organization are the second layer. Such a structure initiates a knowledge flow among companies and thus fosters innovation.

In this paper I compare institutions of vocational education in different countries and analyze the potential of institutions to diffuse knowledge. I analyze elements in the governance structure of vocational education that contribute to knowledge diffusion of companies (e.g. coordinating organizations, joint decision making on training standards and training content, etc.). To do so I compare the governance structure of vocational education systems in coordinated and liberal market economies and in economies that lie in between this categorization. I will use career and technical education (CTE) in the US and vocational education and training (VET) in Germany and Switzerland as cases to illustrate institutions in vocational education and their influence on knowledge diffusion. As a result of this comparison I plan to develop a typology of institutions in vocational education and will associate different innovation outcomes (radical and incremental) to each type. Additionally, I will highlight the implications of each type for other economic outcomes like youth unemployment and transferability of skills. In the conclusion I will highlight implications of my model for the design of vocational education systems in countries.