Labour Demand Adjustment: Does Foreign Ownership Matter?

This paper examines whether multinationals differ in their employment adjustment from domestic companies, using a panel of 5,544 Belgian firms observed between 1998 and 2005. More precisely, we estimate labour adjustment costs by worker and firm types. We propose a new flexible specification that takes into account the role of firm size in adjustment costs. Our results indicate that adjusting white‐collar employment is around half as costly for multinational firms (MNFs) as for domestic firms of the same size. The remaining differential in adjustment costs between MNFs and domestic firms might result, among other things, from multinationals' stronger bargaining power.     

The tortoise and the hare: the impact of employment instability on firm performance

The main objective of this study is to assess the influence of employment instability on firm performance in a sample of publicly traded firms. Competing theoretical arguments are considered with regard to likely outcomes associated with employment instability. A large sample of cross‐sectional time‐series data is then analysed using generalised estimating equations (GEE) regression techniques. Results indicate that employment instability is negatively associated with firm performance, although the relationship is also demonstrated to be quadratic (an inverse U‐shaped relationship). This suggests that the main relationship varies depending upon the level of employment instability. Industry characteristics are also examined as moderators of this main effect. The results suggest a disordinal interaction effect for industry differentiation, where employment instability is negatively associated with firm performance for firms in highly differentiated industries and positively associated in less differentiated industries.     

On recalls, layoffs, variable hours, and labor adjustment costs

The paper analyzes the employment policy of a firm that can vary both hours and the level of employment. The analysis differs from previous work in the adjustment cost literature in that the firm is able to change its employment not only through hires, layoffs, and quits, but also by recalls of employees who were previously laid off. Thus, we introduce the possibility of the firm inventorying the labor input. It is shown that this labor inventory potential is necessary if the firm is to ever lay off workers. Further, it is demonstrated that linear rather than strictly convex adjustment costs are then required if the firm is to always recall employees who were previously laid off prior to hiring new workers.     

Firm risk,investment, and employment growth

This paper examines the relation between firm risk and growth of Finnish firms. The results reveal a negative relation between risk (total and unsystematic risk) and firm investment. This negative relation is robust to the choice of estimation method. The results also suggest that labor-intensive firms respond to increased risk by substituting capital for labor. Discrete decision models reassure the main conclusions by showing that greater risk decreases (increases) the likelihood of simultaneous growth (decline) investment and employment.     

Excess worker turnover and fixed-term contracts: Causal evidence in a two-tier system

Portuguese firms engage in intense reallocation, most employers simultaneously hire and separate from workers, resulting in high excess worker turnover flows. These flows are constrained by the employment protection gap between open-ended and fixed-term contracts. We explore a reform that increased the employment protection of open-ended contracts and generated a quasi-experiment. The causal evidence points to an increase in the share and in the excess turnover of fixed-term contracts in treated firms. The excess turnover of open-ended contracts remained unchanged. This result is consistent with a high degree of substitution between open-ended and fixed-term contracts. At the firm level, we also show that excess turnover is quite heterogeneous and quantify its association with firm, match, and worker characteristics.     

On-the-job training and rigidity of employment protection in the developing world: Evidence from differential enforcement

This paper analyzes the causal effect between strict employment protection regulations and the firm incentive to invest in job training of their employees. We explore a large firm level data set across several developing countries and assume that the rigidity of labor regulations affects more the investment decision of firms that faces a rigid enforcement of labor regulations. Our findings show that differences across countries in the enforcement of more rigid employment protection regulation are associated with very small differences in the investment in job training across firms. This finding is robust across several specifications and samples.     

Evidence on the effects of hostile and friendly tender offers on employment

This paper provides evidence on the effects of successful tender offers on the number of target and acquiring firm employees. No significant change in combined employment is observed, on average, over the three-year period following offer completion. However, hostile tender offers completed between 1980 and 1984 are followed by an average 17.2% decline in employment. Net divestitures of operations over the period are responsible for some of the observed employment decrease; however, an estimated -12.2% change remains, on average, after adjusting for divestiture activity. Information contained in firm annual reports and in the Wall Street Journal indicates that the tender offers in the sample are often followed by considerable restructuring activity with respect to both target and acquiring firm operations. The findings suggest that acquiring firm managements may acquire new operations when the need to restructure their existing operations frees up resources, e.g. cash and/or managerial time and talent. The evidence also suggests that the corporate control market must be viewed as an integral part of the process by which US firms restructure to meet changing circumstances.     

HRM retrenchment practices and firm performance in times of economic downturn: exploring the moderating effects of family involvement in management

A substantial number of studies have indicated a significant negative relationship between human resource management (HRM) retrenchment practices such as downsizing, and firm performance. However, a consideration of the potential effects of business family involvement in management is largely absent from the general employment restructuring literature. Using a sample of 218 Taiwanese publicly listed firms, this study seeks to further our understanding in this area by examining the moderating effects of family involvement in management on the relationship between the adoption of HRM retrenchment practices and firm performance during the period of global economic downturn that erupted in the middle of 2008. Data analysis reveals that HRM retrenchment practices had a negative influence on firm performance, and that the relationship between HRM retrenchment practices and firm performance was negatively and significantly moderated by family involvement in management.     

Firm-specific wage growth and changes in the labor market for managers

This paper analyzes recent changes in the employment relationships between managers and firms. In both Becker's and Lazear's models of firm-specific wage growth, compensation is deferred from early in an employee's tenure with a firm until later in the contract. The deferred compensation bonds the worker to the firm. Based on cross-sectional data from Current Population Surveys, rates of firm-specific wage growth are estimated for the managerial labor market. The findings show that the rate of wage growth that is firm-specific for managers in manufacturing industries declined significantly during the early 1980s. It is estimated, for example, that a manager with 12 years of tenure in a manufacturing firm enjoyed, on average, a 25% wage premium in 1979 over an otherwise similar manager who was a new hire in a firm. By 1983 the firm-specific wage premium for a manager with 12 years of tenure was only 5%. These changes represent a significant reduction in the strength of the employment bond between firms and managers, and a reduction in the incentive effects previously enjoyed by firms from the use of deferred-compensation schemes. This change is consistent with the significant increases in the displacement rates of managers that occurred during the 1980s.     

The relationship between human resource management practices,business strategy and firm performance: evidence from steel industry in Taiwan

The primary objective of this study is to investigate the relationship between human resource management (HRM) practices, business strategy and firm performance. We examined the following HRM practices: training and development; teamwork; compensation/incentives; HR planning; performance appraisal; and employment security. We surveyed 236 managers working at steel firms in Taiwan to explore their perceptions on the impact of HRM practices and business strategy on firm performance. The results of this study are summarized as follows: (1) HRM practices will be positively related to firm performance; (2) there is a close linkage between HRM practices and business strategy; (3) business strategies will be positively related to firm performance; (4) integrating HRM practices with business strategies will be positively related to firm performance.     

Endogenous scope of bargaining in a union–oligopoly model: when will firms and unions bargain over employment?

The scope of firm–union bargaining is shown to be endogenously determined in a union–oligopoly model with decentralized negotiations. If the unions' power is sufficiently high, all bargaining units choose to negotiate over wages alone, i.e., universal right-to-manage bargaining emerges in equilibrium. Otherwise, wage/employment bargaining and right-to-manage bargaining coexist in the same industry. In equilibrium, some firm–union pairs will always choose to bargain over employment as well, since the firms become Stackelberg leaders in the market by committing to a particular output during the negotiations. The firms and their unions both benefit from the additional Stackelberg rents, provided that the unions' power is small enough. Our analysis suggests that there is not necessarily a negative relationship between unions' power and sectoral employment rates.     

New firms and employment creation

This paper uses some simple microeconomic tools to explain the net effect on employment of different types of new firm formation. The first section of the paper examines the way in which actual employment in new firms has been calculated in recent empirical studies. The next section looks at the relationship between the actual and net employment effects of formations and argues that the former may not be a good guide to the latter. The final section examines the policy implications of the analysis.     

Skill shortages and labor market outcomes in Central Europe

The new Central European members of the EU have been characterized by low employment rates, especially among unskilled workers, despite the GDP recoveries and large private sector shares in output and employment. Evidence points at skill shortages in Central Europe as a key impediment to faster labor reallocation and convergence to the EU-15 employment structures. In this paper, we develop a simple model of labor reallocation with transaction costs and show how skill shortages can inhibit firm creation and increase income inequality. We use the model to examine the impact of training subsidies and their financing on skill acquisition and start-ups of new private firms, and show that the positive effect of subsidies would be mostly offset by high wage taxes. Shifting financing from wage to consumption taxes would improve incentives for workers’ training and firm start-ups, while relying more on income taxes could reduce the income gap between workers and entrepreneurs.     

Business start-ups by the unemployed — an econometric analysis based on firm data

Active labour market policies to promote firm foundation from unemployment were improved considerably in Germany in August 1994, a fact which led to a sharp increase in the number of start-ups by the unemployed. The study compares firm survival and employment growth of start-ups by unemployed and others, based on firm data from 15 regions in East and West Germany. Self-selection effects are taken into account by using simultaneous models of start-up promotion and firm development. While firm survival is negatively affected by foundation from unemployment in East Germany (−6%), an influence on employment growth is not evident.     

The role of post-use trust in the acceptance of a technology: Drivers and consequences

The aim of this paper is to shed light on the role of trust in the acceptance of a technology once the firm has already used it (post-use trust). First, we examine the drivers which encourage the firm to trust in a technology and, second, we study the consequences of trust in terms of firm performance and intentions to continue to use the technology. The drivers involve (1) perceptions experienced by the firm during the employment of the technology, (2) the influence of the firm's trading partners and (3) the importance of the IT manager's attitude towards the technology. The study focuses on the acceptance of e-invoicing in Spain and the sample consists of 100 early adopter firms who have perceptions and knowledge about this technology. Our findings clarify the relationship between trust and technology acceptance and have important implications about trust-building structures that could improve the application of technologies that are in the early stages of implementation.     

Family background and gender: implications for interest in small firm ownership

This paper directly assesses the impact of family background, sex and work experience on interest in small firm ownership and employment. Additional exploration focuses on differentiating family background (parents-only versus extended-only) to assess the impact on small firm career interest. Results indicate that family background, sex and work experience are significant predictors of these interests. Specifically, males are more interested than females in someday owning their own small business. Small firm work experience enhanced interest in small firm employment. When comparing males and females with an extended-only family background, males are significantly more interested than females in small firm ownership. Implications for future research are discussed.     

Skill shortages and firms' employment behaviour

This study investigates the effects of skill shortages on the dynamics of employment at the firm level for UK manufacturing between 1984–94. We find that shortages of skilled labour have a statistically significant effect on firms' employment behaviour. It has a positive effect on firms' adjustment costs leading to employment being more sluggish to respond when the labour market is tight, implying that employment adjustment will be more responsive in the downward direction. This result is robust to the inclusion of a measure of firms' sales expectations, with the effect of skill shortages being greater in periods when firms expect sales to rise.     

Comment: further sufficient conditions for an inverse relationship between productivity and employment

Extant empirical studies document that productivity gains due to technological progress often lead to reductions in employment. This paper rationalizes the stated empirical finding within the context of the theory of the competitive firm under price uncertainty. We show that technological progress affects employment adversely if the firm’s coefficient of relative risk aversion is no less than unity and its production technology exhibits non-decreasing returns to scale. On the other hand, technological progress unambiguously increases output if the firm’s preference has non-increasing absolute risk aversion.     

Institutions and preferences in settings of causal complexity: foreign institutional investors and corporate restructuring practices in France

In this article, we illustrate how the interaction between institutional arrangements and the presence of different categories of firm stakeholders with specific preferences provides important insights to understand the conditions under which corporate restructuring practices are introduced. Institutions shape the range of actors' strategic options and mediate the translation of the preferences of firm stakeholders into corporate policies. Nonetheless, strategic choice remains possible since firm stakeholders constitute subgroups with different interests and incentives that influence how they operate in an institutional framework. In particular, we examine under what conditions UK/US-based institutional investors and equity-based compensation incentives are associated with the implementation of asset divestitures and employee layoffs in France. We uncover three key findings. First, the presence of hedge funds and equity-based pay influence the likelihood of French companies undertaking asset divestitures. Second, the impact of hedge funds on employee layoffs is contingent on the ownership structure of firms. Third, layoffs in France are driven by inferior performance – a result that contrasts with the American experience whereby employee layoffs are also used as a strategic mechanism to deal with institutional investors in good times. Our findings demonstrate the importance of the institutional constraints of (national level) employment protection and the moderating effects of ownership structure (firm level) on the strategic and employment policies of French companies.     

Sustainable HRM strategies and employment relationships as drivers of the triple bottom line

This paper aims to develop a conceptual framework capable of analysing the contributions made by strategic human resources management (SHRM) to firm sustainability and competitiveness. Specifically, we identify different sustainable corporate strategies and the way in which they are supported by coherent sustainable HRM strategies. We propose different sustainable employment relationships considering two dimensions: inducements offered by an organisation and expected employee behaviours in order to comply with sustainable HRM strategies. All the above also necessitates a system of HRM practices (content of the employment relationship) that should be well defined and oriented towards sustainability. Accordingly, we suggest associations of specific systems of HRM practices, depending on the type of employment relationship and sustainable HRM strategy, in order to promote the expected ‘Triple Bottom Line’, and which also improve firm competitiveness.