• economics of innovation
• innovation
• labour economics
• panel probit model

Recent empirical studies suggest that the relation between labour flexibility and innovation is much more nuanced than it appears at first glance. The numerical, functional and financial components of labour flexibility influence innovative performance in different ways, and through multiple channels. Moreover, the flexibility-innovation link hinges on the context-specific system of innovation. The present work examines the relation between labour flexibility and innovation, implementing three panel probit models on firm-level data from the Rilevazione Longitudinale su Imprese e Lavoro (RIL). Results suggest that innovation is more likely to occur when firms adopt flexibility policies that foster human resources development. Instead, data show a negative link between innovation performance and unstable employer-employee relationships. Finally, the study provides evidence that the impact of flexibility on innovation crucially depends on the innovation paradigm.