7. Conclusions
In this paper, we investigate the relationship between labour market flexibility in various definitions and innovation. Our results demonstrate that this relationship strongly depends on the type of innovation as well as the predominant innovation regime in which a company operates. Thereby, market flexibility labour market flexibility does not influence innovation in an entrepreneurial innovation regime characterised by high competition, low market entry barriers and generally available knowledge. That might explain why the SiliconValley has been successful despite of having a labour market with a strong hire and fire mentality. In contrast, labour market flexibility significantly reduces the likelihood of innovation in a routinised innovation regime with leading innovators and high entry barriers similar to the US automobile industry and steel districts that did not succeed.