Cost of Failure, Disruptive Innovation and Targeted Flexicurity
LIFT Working Paper 2025-03 — October 2025
This paper expands earlier work by assembling a larger sample of restructuring plans (250 plans) to measure the restructuring costs borne by large firms and to assess their links with business R&D in disruptive sectors (tech/biotech). The authors confirm a wide transatlantic gap, with Germany at 31 months of average salary versus 7 months in the United States, and identify low-cost outliers within Europe (Denmark, Switzerland). They show a strong negative correlation between restructuring costs and R&D intensity in tech and biotech, and conclude with recommendations for targeted reforms of employment protection laws that preserve social protection while restoring the agility critical for disruptive innovation.
flexicurity, EPL, cost of failure, disruptive innovation, R&D, biotech
This paper expands earlier work by assembling a larger sample of restructuring plans (250 plans) to measure the restructuring costs borne by large firms and to assess their links with business R&D in disruptive sectors (tech/biotech). The authors confirm a wide transatlantic gap, with Germany at 31 months of average salary versus 7 months in the United States, and identify low-cost outliers within Europe (Denmark, Switzerland). They show a strong negative correlation between restructuring costs and R&D intensity in tech and biotech, and conclude with recommendations for targeted reforms of employment protection laws that preserve social protection while restoring the agility critical for disruptive innovation.
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