nep-bec New Economics Papers
on Business Economics
Issue of 2005‒01‒02
23 papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Organizational Routines: A Sceptical Look By Teppo Felin; Nicolai J. Foss
  2. Using Networks For Changing Innovation Strategy: The Case of IBM By Dittrich, K.; Duysters, G.; De Man, A-P.
  3. Capital structure and managerial compensation : the effects of remuneration seniority By Calcagno,R.; Renneboog,L.D.R.
  4. Two-Sided Platforms: Pricing and Social Efficiency - Extensions By Andrei Hagiu
  5. The strategic relevance of business relationships: a preliminary assessment By Filipe J. Sousa; Luis M. de Castro
  6. The Anatomy of Union Decline in Britain: 1990-1998 By A Charlwood
  7. Confidence-Enhanced Performance By Olivier Compte; Andrew Postlewaite
  8. Looking for HRM/Union Substitution: Evidence from British Workplaces By Stephen Machin; Stephen Wood
  9. Platform Ownership By Volker Nocke; Martin Peitz; Konrad Stahl
  10. The Union Wage Premium in the US and the UK By D Blanchflower; Alex Bryson
  11. CEO Experience and firm growth in small family firms By Laveren E.; Limère A.; Vanbilsen E.
  12. Job Creation or Destruction? Labor-Market Effects of Wal-Mart Expansion By Emek Basker
  13. Executive Compensation and Product Market Competition By Vicente Cuñat; Maria Guadalupe
  14. The Network Economy and Models of the Employment Contract: Psychological, Economic and Legal By David Marsden
  15. The Returns to Apprenticeship Training By Steven McIntosh
  16. Do Organisational Climate and Strategic Orientation Moderate the Relationship Between Human Resource Management Practices and Productivity? By Andrew Neal; M Patterson; M West
  17. Organizational Climate and Company Productivity: the Role of Employee Affect and Employee Level By M Patterson; P Warr; M West
  18. Corporate Ownership Structure and Performance in Europe By Jeremy Grant; Thomas Kirchmaier
  19. Can a Work Organization Have An Attitude Problem? The Impact of Workplaces on Employee Attitude and Economic Outcomes By Ann Bartel; Richard Freeman; Casey Ichniowski; Morris Kleiner
  20. Is Seniority-Based Pay Used as a Motivation Device? Evidence from Plant Level Data By Alberto Bayo-Moriones; Jose E. Galdon-Sanchez; Maia Guell
  21. Globalisation, ICT and the Nitty Gritty of Plant Level Datasets By Ralf Martin
  22. The Self Selection of Migrant Workers Revisited By Eran Yashiv
  23. Motivating Employee Owners in ESOP Firms: Human Resource Policies and Company Performance By Joseph Blasi; Robert Buchele; Richard Freeman; Douglas Kruse; Chris Mackin; Loren Rodgers; Adria Scharf

  1. By: Teppo Felin; Nicolai J. Foss
    Abstract: Organizational routines and capabilities have become key constructs not only in evolutionary economics, but more recently also in business administration, specifically strategic management. In this chapter we explicate some of the underlying theoretical problems of these concepts, and discuss the need for micro-foundations. Specifically, we focus on some of the explanatory problems of collective-level theorizing, and what we think are tenuous assumptions about human beings. We argue that individual-level considerations deserve significantly more consideration, and that evolutionary economics and strategic management would be well served by building on methodological individualism.
    JEL: D2 L2 M1
    Date: 2004
  2. By: Dittrich, K.; Duysters, G.; De Man, A-P. (Erasmus Research Institute of Management (ERIM), Erasmus University Rotterdam)
    Abstract: Large-scale strategic change projects in companies may be supported by using alliance networks. This paper shows that IBM?s change from an exploitation strategy towards an exploration strategy required a radically different network strategy as well. By entering into more non-equity alliances, involving new partners in the network and loosening the ties with existing partners, IBM supported its transformation from a hardware manufacturing company to a global service provider and software company.
    Keywords: Networks;innovation;strategic change;exploration/exploitation;IBM;
    Date: 2004–12–23
  3. By: Calcagno,R.; Renneboog,L.D.R. (Tilburg University, Center for Economic Research)
    Abstract: We show that the relative seniority of debt and managerial compensation has important implications on the design of remuneration contracts. Whereas the traditional literature assumes that debt is senior to remuneration, we show that this is frequently not the case according to bankruptcy regulation and as observed in practice. We theoretically show that including risky debt changes the incentive to provide the manager with stronger performance-related incentives ("contract substitution" effect). If managerial compensation has priority over the debt claims, higher leverage produces lower powerincentive schemes (lower bonuses) and a higher base salary. With junior compensation, we expect more emphasis on pay-for-performance incentives. The empirical findings are in line with the regime of remuneration seniority as the base salary is significantly higher and the performance bonus is lower in financially distressed firms.
    JEL: G32 G33 G34 K12
    Date: 2004
  4. By: Andrei Hagiu
    Abstract: This paper contains two extensions of the modelling framework proposed by Hagiu (2004a) for studying two-sided market platforms. First, introducing vertical differentiation among both users and developers, we show that the optimal platform pricing structure continues to shift towards making a larger share of profits on developers relative to users when the latter have a stronger preference for product variety. Also, when developers are vertically differentiated, a two-sided proprietary platform may induce socially excessive product variety, a scenario which never occurs in the horizontal differentiation model. Second, we introduce developer investment in product quality and show that a two-sided proprietary platform may be more socially efficient than an open platform in terms of the product quality it induces, even when when it is less efficient with respect to the level of product variety. In this context we also determine the profit-maximizing proportional variable fee charged by a proprietary platform to developers and show that it is is increasing in the degree of developer risk-aversion and is used by the platform to trade product variety for product quality when developers' marginal cost of quality provision increases.
    Date: 2004–12
  5. By: Filipe J. Sousa (Instituto Superior de Administração e Línguas (ISAL)); Luis M. de Castro (Faculdade de Economia, Universidade do do Porto)
    Abstract: The ubiquitous contention within the Industrial Networks literature - that business relationships are one of the firm´s most important resources - has not been, in our viewpoint, thoroughly explored. Hence we argue that the ‘Resource-based View of the Firm’ (‘RBV’) may complement the network-based reasoning on the strategic relevance of business relationships. A theoretical framework is proposed – a competence-based view of the firm – which solves RBV´s terminological and inconsistency problems and, more importantly, assures compatibility with the network perspective´s assumptions. The possibility of cross-fertilizing the Industrial Networks and RBV theories seems not only real, but also conceptually profitable for both theoretical fields.
    Keywords: Business Relationships, Industrial Networks, Resource-Based View of the Firm, Competence-Based View of the Firm
    JEL: M10 M31
    Date: 2004–12
  6. By: A Charlwood
    Abstract: To what extent can the decline in British trade union density between 1990 and 1998 be attributed to decliningopportunities to unionize compared to declining propensity to unionize among workers with the opportunity todo so and to compositional change? This question is answered using data to from both workplaces (from 1990and 1998 Workplace Employee Relations Surveys) and individuals (fro m the British Household Panel Survey).Results show that both falling opportunities and falling propensities to unionize accounted for membershipdecline during this period. Membership fell because unions lacked the power to maintain bargainingrelationships with management, to organize new workplaces, or to uphold the ¿social custom¿ of unionmembership among new workers who took union jobs. However, there was little evidence that declining unionmembership was the result of a change in employee attitudes towards unions.
    Keywords: Labour Management Relations, Trade Unions, Collective Bargaining
    JEL: J5
    Date: 2003–12
  7. By: Olivier Compte (Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS)); Andrew Postlewaite (Department of Economics, University of Pennsylvania)
    Abstract: There is ample evidence that emotions affect performance. Positive emotions can improve performance, while negative ones may diminish it. For example, the fears induced by the possibility of failure or of negative evaluations have physiological consequences (shaking, loss of concentration) that may impair performance in sports, on stage or at school. There is also ample evidence that individuals have distorted recollection of past events, and distorted attributions of the causes of successes of failures. Recollection of good events or successes is typically easier than recollection of bad ones or failures. Successes tend to be attributed to intrinsic aptitudes or own effort, while failures are attributed to bad luck. In addition, these attributions are often reversed when judging the performance of others. The objective of this paper is to incorporate the first phenomenon above into an otherwise standard decision theoretic model, and show that in a world where performance depends on emotions, biases in information processing enhance welfare.
    Keywords: Confidence, Perception, Psychology
    JEL: D8
    Date: 2001–05–01
  8. By: Stephen Machin; Stephen Wood
    Abstract: In this paper we test the HRM/union substitution hypothesis that human resource management (HRM) practices act as a substitute for unionization. We use British workplace data between 1980 and 1998 which allows us toexamine for the first time whether increased HRM incidence has coincided with union decline.First, we compare changes over time in the incidence of HRM practices across union and non-union sectors, finding little cross-time difference occurring between sectors. Second, we ask whether newer workplaces (strongly shown by other research as more likely to be non-union) have experienced differentiallyfaster HRM incidence; we are unable to find much evidence in support of this. Third, longitudinal changes alsofail to pick up any evidence of faster union decline in workplaces or industries with faster take up of HRMpractices. We find no evidence of HRM substitution operating in the hypothesised way of it replacing unions and conclude that increased HRM incidence does not seem to be an important factor underpinning union decline in Britain.
    Keywords: Human Resource Management, Trade unions
    JEL: J51
    Date: 2004–01
  9. By: Volker Nocke (Department of Economics, University of Pennsylvania); Martin Peitz (Department of Economics, University of Mannheim); Konrad Stahl (Department of Economics, University of Mannheim)
    Abstract: We develop a general theoretical framework of trade on a platform on which buyers and sellers interact. The platform may be owned by a single large, or many small independent or vertically integrated intermediaries. We provide a positive and normative analysis of the impact of platform ownership structure on platform size. The strength of network effects is important in the ranking of ownership structures by induced platform size and welfare. While vertical integration may be welfare-enhancing if network effects are weak, monopoly platform ownership is socially preferred if they are strong. These are also the ownership structures likely to emerge.
    Keywords: Two-Sided Markets, Network Effects, Intermediation, Product Diversity
    JEL: L10 D40
    Date: 2004–07–21
  10. By: D Blanchflower; Alex Bryson
    Abstract: This paper presents evidence of both counter-cyclical and secular decline in the union membership wage premiu m inthe US and the UK over the last couple of decades. The premium has fallen for most groups of workers, the mainexception being public sector workers in the US. By the beginning of the 21st Century the premium remainedsubstantial in the US but there was no premium for many workers in the UK. Industry, state and occupation-levelanalyses for the US identify upward as well as downward movement in the premium characterized by regression tothe mean. Using linked employer-employee data for Britain we show estimates of the membership premium tend tobe upwardly biased where rich employer data are absent and that OLS estimates are higher than those obtained withpropensity score matching.
    Keywords: union membership wage premium.
    JEL: J51 J52
    Date: 2004–02
  11. By: Laveren E.; Limère A.; Vanbilsen E.
    Abstract: The primary purpose of this paper is to examine the relationship between firm performance (measured as growth in value added) and the depth of the experience of the Chief Executive Officer. Based on a sample of 511 small family firms, the research results show that the relationship between firm performance and CEO experience is not as clear-cut as was previously assumed. The results suggest curvilinearity to exist. Experience is contributive to the growth in value added of a firm up to a certain level of CEO-ship and dissimilar industry tenure after which it then becomes counterproductive. In addition the results show that firms with CEOs currently holding multiple directorships are found to generate significantly higher performance levels and that growth rates appear to lessen according to the age of the CEO
    Date: 2004–11
  12. By: Emek Basker (Department of Economics, University of Missouri-Columbia)
    Abstract: This paper estimates the effect of Wal-Mart expansion on retail employment at the county level. Using an instrumental-variables approach to correct for both measurement error in entry dates and endogeneity of the timing of entry, I find that Wal-Mart entry increases retail employment by 100 jobs in the year of entry. Half of this gain disappears over the next five years as other retail establishments exit and contract, leaving a long-run statistically significant net gain of 50 jobs. Wholesale employment declines by approximately 20 jobs due to Wal-Mart’s vertical integration. No spillover effect is detected in retail sectors in which Wal-Mart does not compete directly, suggesting Wal-Mart does not create agglomeration economies in retail trade at the county level.
    Keywords: Wal-Mart
    JEL: J21 L11 L81
    Date: 2004–12–15
  13. By: Vicente Cuñat; Maria Guadalupe
    Abstract: The aim of this paper is to study the effects of product market competition on the explicit compensationpackages that firms offer to their executives. In order to measure the net effect of competition we use twodifferent identification strategies. The first exploits cross sectoral variation in concentration ratios and thepanel nature of the dataset. The second uses as a quasi-natural experiment the deregulations that occurredin the banking and financial sectors in the nineties and estimates differences in differences coefficients. Ourresults show that a higher level of product market competition increases the performance pay sensitivity ofexecutive compensation schemes, and they hold through a number of performance measures such as stockoptions or bonus. The results are robust to a number of specification checks.
    Keywords: Executive compensation, product market competition, performance related pay
    JEL: M52 L1 J31
    Date: 2004–02
  14. By: David Marsden
    Abstract: The emergence of the so-called ¿network economy¿ and the development of project-basedwork pose a fundamental challenge to established methods of regulating the employmentrelationship. There appears to be an unsatisfied demand for its greater use, especially amongemployers, and it is argued that this may be blocked by the lack of suitable contractual forms,such as those that have underpinned the established open-ended employment relationship.Project-based work seeks to retain some of the open-ended flexibility of the standardemployment relationship in relation to its task content but not its duration. The paper arguesthe success of the standard employment relationship owes much to the articulation of itspsychological, economic/incentive, and legal aspects. As yet, this appears to be lacking formore transient forms of relationship.
    Keywords: Network economy, Labor Contracting, Labor Law, Labor-Management Relations
    JEL: M55 K31 J44 J53
    Date: 2004–02
  15. By: Steven McIntosh
    Abstract: This paper uses recent data from the UK Labour Force Survey to estimate the wage gains thatindividuals make on average if they complete an apprenticeship programme. The resultssuggest gains of around 5-7% for men, but no benefit for women. Further analysis extendsthe results by considering the returns by age group, by qualification obtained, by highest priorqualification and by industrial sector. A key finding emerging from this further analysis is theimportance of acquiring qualifications with the apprenticeship, at level 3 or above.
    Keywords: apprenticeship, wage equations
    JEL: J24
    Date: 2004–03
  16. By: Andrew Neal; M Patterson; M West
    Abstract: Contingency formulations of Human Resource Management (HRM) theory suggest thatthe effectiveness of HRM practices should vary across firms. This study examinedwhether the relationship between HRM practices and productivity in manufacturingcompanies is contingent upon organizational climate and strategic orientation.Information on HRM, organizational structure, and competitive strategy was collected byinterviewing senior managers, whilst organizational climate was assessed via employeesurveys. Although organizational climate and HRM practices were both positivelyassociated with subsequent productivity, the relationship between HRM practices andsubsequent productivity was stronger for firms with a poor climate.
    Keywords: Human Resource Management, organisational structure, organisationalclimate, productivity
    JEL: M11 M12 J5 J24
    Date: 2004–03
  17. By: M Patterson; P Warr; M West
    Abstract: Consistent with a growing number of models about affect and behaviour and with arecognition that perception alone provides no impetus for action, it was predicted thatassociations between company climate and productivity would be mediated by average levelof job satisfaction. In a study of 42 manufacturing companies, subsequent productivity wassignificantly correlated in controlled analyses with eight aspects of organizational climate(e.g. skill development and concern for employee welfare) and also with average jobsatisfaction. The mediation hypothesis was supported in hierarchical multiple regressions forseparate aspects of climate. In addition, an overall analysis showed that companyproductivity was more strongly correlated with those aspects of climate that had strongersatisfaction loadings. A second prediction, that managers¿ perceptions of climate would bemore closely linked to company productivity than would those of non-managers, was notsupported. However, managers¿ assessments of most aspects of their company¿s climatewere significantly more positive than those of non-managers.
    Keywords: Organizational structure, organizational climate, employee welfare, manager,productivity.
    JEL: M11 M12 J5 J24
    Date: 2004–04
  18. By: Jeremy Grant; Thomas Kirchmaier
    Abstract: In this paper, we show that ownership structures vary considerably across Europe, and that the dominant form ofownership is not necessarily the most efficient one. These findings are in contradiction to similar research basedon US samples. The results also demonstrate that firms without a dominant shareholder tend to outperform theircountry peer groups. We base our analysis on a new and unique dataset of uniform ownership data of the largest100 firms in the five major European economies. We quantify the differences in ownership by comparing threedistinct ownership structures of firms and relating them to performance. For the first time we employ aHodrick-Prescott Filter, a methodology widely used in macroeconomics to isolate the trend growth componentsfrom cyclical fluctuations, to estimate the share price trend of each firm. We take this trend as a good indirectindicator of the quality of governance.
    Keywords: Corporate governance, ownership structures, performance, Europe
    JEL: G32 G34 G38
    Date: 2004–04
  19. By: Ann Bartel; Richard Freeman; Casey Ichniowski; Morris Kleiner
    Abstract: In this study we examine whether a workplace can induce good or bad attitudes among its employees andwhether any such ¿workplace attitudes¿ affect economic outcomes. This study analyzes responses ofthousands of employees working in nearly two hundred branches to the emp loyee opinion survey of amajor US bank in 1994 and 1996. The results document the existence and persistence of a genuineworkplace effect in how workers view their jobs and organizations. Employee attitudes differ significantlyacross branches in ways that cannot be explained by branches randomly drawing workers from adistribution of workers with different innate attitudes. Furthermore, newly hired workers adopt thefavourable or unfavourable attitudes that the branches exhibited before they arrived. These workplaceattitudes also have significant effects on economic outcomes. Branches with less favourable attitudes havehigher turnover, lower levels of sales, and lower rates of sales growth than branches where workers havemore favourable attitudes. Less favourable branch attitudes are also a significant predictor of subsequentbranch closings. The study¿s results show that there are happy and unhappy workplaces, as well as happyand unhappy workers, with very different patterns of turnover and productivity in these workplaces.
    Keywords: work motivation, workplace attitudes, organization, performance
    JEL: J0 J2
    Date: 2004–05
  20. By: Alberto Bayo-Moriones; Jose E. Galdon-Sanchez; Maia Guell
    Abstract: In this paper we use data from industrial plants to investigate if seniority-based pay is used asa motivational device for production workers. Alternatively, seniority-based pay could simplybe a wage setting rule not necessarily related to the provision of incentives. Unlike previouspapers, we use a direct measure of seniority-based pay as well as measures of monitoringdevices and piece-rates. We find that firms that offer seniority-based pay are less likely tooffer explicit incentives. They are also less likely to invest in monitoring devices. We alsofind that firms that offer seniority-based pay are more likely to engage in other humanresource management policies that result in long employment relationships. Overall theseresults suggest that seniority-based pay is indeed used as a motivation device.
    Keywords: Human resource management practices, incentives, monitoring
    JEL: M52 M12 J30
    Date: 2004–08
  21. By: Ralf Martin
    Abstract: The net entry contribution to aggregate productivity growth has increased dramatically in the UK over 1990saccording to calculations based on data from the Annual Respondents Database (ARD). Some recent studieshave tried to link this to other structural changes over the same period such as increased globalisation and usageof ICT. I argue that the increase might equally have been caused by a systematic bias that is introduced togrowth decompositions through random survey sampling of the underlying plant or firm panel datasets. Thisbias - despite being a general problem of growth decompositions does not seem to have been noticed in theliterature yet. In the 1990s the Office for National Statistics (ONS) has successively increased the share of plantsin the population of the ARD that are subject to random sampling. I show that this could cause the bias tospuriously increase the net entry contribution. My results show that correcting for the bias makes a substantialdifference: the net entry contribution is about 10 percentage points lower on the corrected series in the 1990s.Surprisingly however, the positive correlation between ICT and net entry share - a main result of earlier studies- becomes more significant.
    Keywords: Productivity Growth Decomposition, Micro Data, Random Sampling, Globalisation, ICT
    JEL: C1 F00 L25 L6
    Date: 2004–09
  22. By: Eran Yashiv
    Abstract: Work of low-skilled migrant workers from developing countries in developed economies is a growingphenomenon and a key political and economic issue. An extensive literature has found (for the mostpart) that these workers come from the lower part of the skill distribution. This paper revisits theissue, using a self-selection model, a unique data-set on migrant workers as well as on workers thatchose not to migrate ('stayers'), and direct estimation of the moments of the latent unobserved skilldistributions. The main findings are that there are two dimensions to self-selection: in terms ofobserved skills, a substantial migration premium lures migrant workers, while very low returns toskills in the foreign economy deter skilled workers, leading to negative self-selection. In terms ofunobservable skills, self-selection is found to be positive rather than negative. The latter findingentails substantial increases in mean wages and reduction in wage inequality, relative to randomassignment and to the alternative of not migrating. The analysis also demonstrates that estimates ofskill premia for migrants — an important issue in the immigration literature — are upward biased ifselection is not accounted for. Relevant skills are multi-dimensional, hence assignments in thiscontext are non-hierarchical.
    Keywords: self-selection, migrant workers, skill premia, migration premium, unobservable skills,non-hierarchical sorting, wage inequality.
    JEL: J3 J6 F2
    Date: 2004–10
  23. By: Joseph Blasi; Robert Buchele; Richard Freeman; Douglas Kruse; Chris Mackin; Loren Rodgers; Adria Scharf
    Abstract: What enables some employee ownership firms to overcome the free rider problem andmotivate employees to improve performance? This study analyzes the role of humanresource policies in the performance of employee ownership companies, using employeesurvey data from 14 companies and a national sample of employee-owners. Between-firmcomparisons of 11 ESOP firms show that an index of human resource policies, nominallycontrolled by management, is positively related to employee reports of co-workerperformance and other good workplace outcomes (including perceptions of fairness, goodsupervision, and worker input and influence). Within-firm comparisons in three ESOP firms,and exploratory results from a national survey, show that employee-owners who participatein employee involvement committees are more likely to exert peer pressure on shirking coworkers.We conclude that an understanding of how and when employee ownership workssuccessfully requires a three-pronged analysis of: 1) the incentives that ownership gives; 2)the participative mechanisms available to workers to act on those incentives; and 3) thecorporate culture which battles against tendencies to free ride.
    Keywords: human resources, industrial relations, employee ownership
    JEL: M5 M40 O15
    Date: 2004–11

This nep-bec issue is ©2005 by Christian Calmes. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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