What Do Unions Do to Innovation? An Empirical Examination of the Canadian Private Sector

Using longitudinal data from the Canadian Workplace and Employee Survey, this article estimates the union effect on a firm's ability to innovate new products. The results do not find a negative relationship between unions and product innovation. Surprisingly the presence of a union is found to have a small positive effect on a firm's ability to innovate new products. These results do not imply that unions are important determinants of product innovation; instead they are noteworthy because a negative effect is not observed. These findings contradict the popular assertion that unions generally detract from firm performance. The article then reviews the Canadian and U.S. empirical literature on the union effect on various measures of firm performance, such as labour costs, employment growth, sales and profitability. In keeping with the results of this paper it appears that the argument that unions detract from firm performance is not based on a conclusive body of empirical evidence.