Direct and non-linear innovation effects of demographic shifts

Abstract

Abstract A varied set of pressures drive organizational innovation. Among these pressures, demographic shifts seem to boost innovation, as the public sector responds to the arrival of migrants and to community changes in race and ethnic composition. However, we know little about innovation by governments in response to expected population decline. In particular, studies have under‐examined how anticipated demographic pressures prompt public organizations to innovate. This study undertakes this task by arguing that innovation is more visible in municipalities facing greater anticipated demographic decline. However, we also argue for a non‐linear relationship in which too strong and/or too weak expected demographic declines lead to less visible innovation (inverted U‐shape effect). These propositions were tested with a data set of Japanese municipalities and employing a dose–response model. Findings show that anticipated demographic declines directly boost innovation visibility. However, too strong and/or too weak unexpected demographic declines make innovation less visible.