While an increasing number of studies postulate that vocational education and training (VET) activities have a positive impact on the innovative capacity of training companies, empirical evidence on the topic remains contradictory. This study exploits establishment data from a representative survey of German companies to estimate the relationship between firms’ participation in initial VET and their innovation outcomes. Our results show that the direct effects of initial VET on technological innovation in small and medium-sized enterprises (SMEs) are on average quite weak. If at all, a training firm’s initial VET activities are associated with product innovation activities and not with process innovation. Larger effects can only be observed in case of microenterprises with fewer than ten employees. In these firms, initial VET is associated with a higher probability of (local) new-to-market product innovation if it is accompanied by changes in organisational processes that support individual learning and knowledge creation. We conclude from this finding that the knowledge diffusion function of the VET system primarily holds relevance for the smallest of the training companies and that initial VET is only positively related to technological innovation when it goes along with organisational learning in the training company. © 2023 The Vocational Aspect of Education Ltd.
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