Job protection regulations that affect a firm’s flexibility to recruit and dismiss workers can interfere with this process, making it difficult both for newcomers to find jobs and for firms to adopt new technologies. The inability to adjust hours flexibly through the use of overtime, part-time and temporary work may also stifle innovation.
According to the European Car Assembly Association, similar research projects take much longer to complete in Germany than in the United States because of shorter working hours and less flexible working conditions. As a result, they argue that German automobile manufacturers are less able to exploit the shorter product life cycles associated with more fashionable and high-tech cars.