Human Resource Management’s Effects on Firm‐Level Relative Efficiency

Using stochastic frontier production functions methodology with data from 1579 private‐sector establishments, we demonstrate that HR practices are significantly associated with differences in relative firm‐level efficiency. Supplemental analysis implies that this efficiency analysis is substantively different than the common approach to evaluating HRM’s relationships with firm‐level labor productivity. The results suggest that HR practices’ contributions to relative firm‐level efficiency are an important but heretofore overlooked factor in the relationship between HRM and firm performance.     

The Form of Relationship between Firm‐Level Product Innovativeness and New Product Performance in Developed and Emerging Markets

This study compares the new product performance outcomes of firm‐level product innovativeness across a developed and emerging market context. In so doing, a model is constructed in which the relationship between firm‐level product innovativeness and new product performance is anticipated to be curvilinear, and in which the nature of this relationship is argued to be dependent on organizational and environmental factors. The model is tested using primary data obtained from chief executive officers and finance managers in 319 firms operating in the United Kingdom, an advanced Western market, and 221 firms from Ghana, an emerging Sub‐Saharan African market. The model is assessed using a structural equation model multigroup analysis approach with LISREL 8.5. In the United Kingdom and Ghana, the basic form of the relationship between firm‐level product innovativeness and business success is inverted U‐shaped, but the strength and/or form of this relationship changes under differing levels of market orientation, access to financial resources, and environmental dynamism. While commonalities are identified across the two countries (market orientation helps firms leverage their product innovativeness), differences are also observed across the samples. In Ghana, access to financial resources enhances the relationship between product innovativeness and new product performance, unlike in the United Kingdom where no moderation is observed. Furthermore, while U.K. firms leverage product innovativeness to their advantage in more dynamic environments, Ghanaian firms do not benefit in this way: here, high levels of innovation activity are less useful when markets are more dynamic. If the study's findings generalize, there are a number of implications for managers of both emerging and developed market businesses. First, managers in both developed and developing market firms should focus on determining and managing an optimal balance of novel and intensive product innovativeness within the context of their unique institutional environments. Second, for emerging market firms, a market orientation capability helps businesses leverage local market intelligence, enabling them to compete with multinational giants flocking to emerging markets, but typical developed market learning approaches may be insufficient for multinational firms when seeking to compete in emerging markets. Third, for emerging market firms, access to finances helps deliver product innovation success (although this is not the case for developed market firms, possibly due to strong financial institutions). Finally, unlike developed market firms, burdened by institutional voids at home, emerging market firms appear to be less capable of competing on an innovation front in more dynamic market conditions. Accordingly, policymakers in emerging markets should consider identifying ways to help businesses raise market orientation levels, and seek to create conditions that enhance access to financial capital (e.g., direct financing, matching grants, tax rebates, or rewarding firms that innovate creatively and intensely). Likewise, since environmental dynamism is likely to be a growing issue for emerging markets, efforts to help firms become more adept at keeping up with more agile developed market counterparts are needed.     

Where Firm‐Level Innovation and Industrial Policy Meet: Consensus Roadmaps for Low‐Carbon Powertrain Technologies

Environmental mandates, energy security concerns, and societal demands place considerable pressure on automotive manufacturers to develop novel powertrain technologies that reduce energy consumption, and in turn, carbon emissions. The economic case for these novel technologies is far from clear, however, and firms often turn to the respective national governments for R&D aid and demand‐side subsidies. Government on the other hand often feels unable to back any single technology for competition regulatory reasons, while at the same time being presented with conflicting messages from industry where to focus its support. This paper reports on an initiative by the U.K. Government that led to the establishment of a permanent forum for government‐industry exchange, the Automotive Council U.K., in which the author has participated from the outset. In the course of the Council's work, two “consensus roadmaps” have been developed jointly by industry and the U.K. Government to guide national efforts in the transition for both passenger car and commercial vehicle powertrain technologies toward low‐carbon alternatives. This paper discusses the key technological development stages and projections outlined in these technology roadmaps and comments on the general determinants of an effective interaction between government and industry in the light of a technological discontinuity.     

Firm‐Level Monopsony and the Gender Pay Gap

This study uses linked employer–employee data to estimate firm‐by‐gender specific labor supply elasticities. Using a dynamic model of labor supply, I find evidence that females face a greater degree of search frictions than males. However, the majority of the gender gap in labor supply elasticities is driven by across‐firm sorting rather than within‐firm differences. I find that males face a labor supply elasticity 0.15 points higher than females, which leads to 3.3 percent lower earnings for women. Sixty percent of the elasticity differential can be explained by marriage and child penalties faced by women but not men.     

Firm‐Level Collective Bargaining and Wages in Greece: A Quantile Decomposition Analysis

This article analyzes the effect of firm‐level contracting on the wage structure in the Greek private sector. Using a matched employer–employee dataset for 2006, unconditional quantile regressions and relevant decomposition methods, we identify a wage premium associated with firm‐level contracting, which follows a hump‐shaped profile across the wage distribution. Further, the wage differential between workers under firm‐level and broader‐level collective agreements can be primarily attributed to the differences in the regime‐specific wage setting structure, for those below the median of the unconditional wage distribution, and to differences in worker and firm‐specific characteristics for those in the upper tail.     

Heterogeneous Firm‐Level Effects of Knowledge Exchanges on Product Innovation: Differences between Dynamic and Lagging Product Innovators*

Product innovation is the result of a constant interaction between the in‐house research and development (R&D) department and knowledge exchanges with the firm's environment. Knowledge exchanges come in different forms. They break down into information gathering applied in new product development, research cooperation on particular innovation projects, and managing information outflows allowing the consequent appropriation of the results of product innovation through specific methods. The way firms handle knowledge exchanges affects their performance. This paper looks at three related indicators of performance: (1) research intensity (a measure of innovative input); (2) the share of revenue realized through innovative product sales (a measure of innovative output); and (3) their impact on the growth in total revenue. The bulk of the econometric literature looking into these matters only allows general statistical statements on the behavior of an “average” firm. This paper takes on another view by using the quantile regression method to stress the heterogeneity of innovative firms in their dealing with knowledge exchange and the effect this has on their performance. A first key finding is that research intensity is positively influenced by knowledge externalities, research cooperation, and appropriability, and it is through this that these variables affect innovative revenue and also the growth in total revenue. By using quantile regression these relationships are further refined to screen for differences in behavior between dynamic and lagging innovators. This refinement indicates that, in the case of research intensity, the knowledge externalities gain in importance in the higher quantiles and are insignificant in the lower ones. Next, research cooperation remains important in all quantiles, but a higher significance is observed in the higher quantiles as well. Finally, appropriability is extremely important for the lower quantiles, but it becomes insignificant in the highest. These findings corroborate the assumptions made in the literature on open innovation: knowledge externalities and research collaboration are vital for those opening up their firm for new ideas and who are, at the same time, reluctant to protect their findings through specific appropriation measures. In the case of innovative revenue all variables on knowledge exchange operate through the research intensity irrespective of the quantile, although the impact of research intensity on this type of revenue is higher in the upper quantiles. As for the growth in revenue, the effect of the innovative revenue is, again, higher in the higher quantiles. This suggests that dynamic product innovators have the most efficient R&D process and the strongest growers are so, especially, because they are successful product innovators.     

The Structure of Hiring Costs in Germany: Evidence from Firm‐Level Data

This paper analyzes the structure of hiring costs of skilled workers in Germany. Using detailed and representative firm‐level data on recruitment and adaptation costs of new hires, we find that average hiring costs amount to more than 8 weeks of wage payments (€4700). The structure of hiring costs is convex, as an increase in the number of hires by 1 percent increases hiring costs by 1.3 percent. We find moderate effects of labor market institutions on the magnitude but none on the structure of hiring costs. Furthermore, we provide evidence in favor of monopsony power in the German labor market.     

The ‘Flexible Firm’: Strategy and Segmentation

This paper draws together and provides further analysis of two research projects commissioned by the Department of Employment, with a focus on employers' labour use strategies in Britain. It seeks to place on a firmer statistical basis arguments about the presence and growth of the ‘flexible firm’, and it draws also on case-study data to explore some of the issues relating to flexibility and strategy. Our conclusions are that there has been a marked absence of strategy in this area, and reasons for this are explored, as are the implications for gender and segmentation in the labour market.     

Influencing public policymaking: Firm‐, industry‐, and country‐level determinants

This paper examines the determinants of firms' public policymaking influence. Using a novel and global database that measures firms' perceived influence over the executive and legislative branches of government, a systematic analysis of the firm‐, industry‐, and country‐level determinants, and interrelationships among these determinants of firms' public policymaking influence is undertaken. The empirical results indicate that large firms perceive they have more public policymaking influence than small firms, but these differences are conditioned by the number of industry competitors and the structure of the country political institution environment. Nonmarket strategy implications that follow from this refined understanding are developed and discussed. Copyright © 2014 John Wiley & Sons, Ltd.     

The Impact of Wage Bargaining Regime on Firm‐Level Competitiveness and Wage Inequality: The Case of Ireland

This paper uses a linked employer‐employee dataset to analyze the impact of institutional wage bargaining regimes on average labor costs and within‐firm wage dispersion in private sector companies in Ireland. The results show that while centralized bargaining reduced labor costs within both the indigenous and foreign‐owned sectors, the relative advantage was greater among foreign‐owned firms. The analysis suggests that there are potentially large competitiveness gains to multinational companies that locate in countries implementing a centralized bargaining system. Furthermore, the results provide additional support to the view that collective bargaining reduces within‐firm wage inequality.     

Bribery and investment: Firm‐level evidence from Africa and Latin America

Research summary : Using a unique database that measures firm‐level bribery in Africa and Latin America, we corroborate extant results in the literature that paying bribes deters firm investments in fixed assets. Our contribution is to explore four mechanisms. By adopting a reverse causality approach (Gelman and Imbens, 2013), we find evidence consistent with one of them: short‐term oriented firms prefer to bribe rather than invest in fixed assets, while the opposite is true for firms with a long‐term orientation. We rule out that bribe payments drain financial resources for investment, that firms that invest do not bribe because fixed assets make them less flexible and more vulnerable to future bribes, and that less efficient firms bribe rather than invest. Managerial summary : We ask whether, along with ethical issues, bribing affects the behavior and performance of firms in Africa and Latin America. Our statistical analysis shows that bribe payments do not reduce the short‐term performance of firms, but frustrate investments in fixed assets, which is the foundation of firms' long‐term growth. It is like seeking a job via nepotism or education. Nepotism makes it likely to find a job in the short term. However, the solid skills generated by education raise the odds of finding better jobs in the future. We rule out some common explanations for the trade‐off between bribing and investment (e.g., bribes drain resources to invest or that less efficient firms bribe and do not invest). Our analysis suggests that firms with short‐term orientations are more likely to bribe and firms with long‐term orientation are more likely to invest. Copyright © 2015 John Wiley & Sons, Ltd.     

Firm‐Size Wage Gaps along the Formal‐Informal Divide: Theory and Evidence

Observationally equivalent workers are paid higher wages in larger firms. This fact is often called the “firm‐size wage gap” and is regarded as a key empirical puzzle. Using microlevel data from Turkey, we document a new stylized fact: The firm‐size wage gap is more pronounced for informal (unregistered) jobs than for formal (registered) jobs. To explain this fact, we develop a two‐stage wage‐posting game with market imperfections and segmented markets, the solution to which produces wages as a function of firm size in a well‐defined subgame‐perfect equilibrium. The model proposes two explanations. First, taxes on formal employment generate a wedge between formal and informal size wage gaps. Thus, government policy can potentially affect the magnitude of the firm‐size wage gaps. The second explanation features a market‐based framework with strategic interactions. Relative to small firms, large firms typically post higher wages for both formal and informal jobs. A high‐wage formal job attracts a larger pool of applicants than a high‐wage informal job. The larger pool of applicants for the formal job, in turn, allows the firm to somewhat lower the initial wage offer, while this second‐round effect is negligible for informal jobs. As a result, size differentials are lower in formal jobs than informal jobs. We argue that the observed patterns in the use of social connections in job search and heterogeneity in job preferences can be used to justify the validity of this second mechanism.     

Institutions Are What Actors Make of Them — The Changing Construction of Firm‐Level Employment Relations in Spain

This article analyses the variation and change in firm‐level employment relations in Spain between the transition to democracy and the global financial crisis. Using three auto companies as case studies, I address a crucial puzzle in the institutional literature on comparative employment relations: How do employment relations change and vary, even when national employment relations institutions do not? This article argues that differences in actor ideologies shape the construction of national institutions at the firm level, which explains change and variation of employment relations over time and across cases. The study identifies four drivers of ideological change — generational change, leadership change, identity work and diffusion — that impact the variation and change in employment relations at the firm level.     

Policy risk,strategic decisions and contagion effects: Firm‐specific considerations

Research summary : In this article, we investigate the firm‐specific environment and its impact on firm strategy focusing on adverse changes in the policy environment and their effect on divestitures. We argue that experiencing a negative change in the firm‐specific policy environment causes firms to reassess their exposure to policy risk and their ability to manage their policy environment, making them more likely to divest. Operationalizing negative shifts in the firm‐specific policy environment through formal policy disputes between firms and governments, we find that following a dispute, firms are more likely to divest both in the country where the dispute occurs and in other countries in the same region. However, the impact of disputes on divestitures is firm specific, applying only to firms directly involved in a dispute . Managerial summary : What is the impact of change in the firm‐specific environment on firm strategy? We argue that when firms directly experience a negative change in their policy environment that is specific to them, they negatively reassess their exposure to policy risk and their ability to manage their policy environment, which makes them more likely to undertake a divestiture. We analyze formal disputes between firms and governments that arise from adverse changes in policy and find that, following a dispute, firms are more likely to divest in the country where the dispute occurs and in other countries in the same region. However, the impact of disputes on divestitures is firm specific as it applies only to firms directly involved in a dispute . Copyright © 2016 John Wiley & Sons, Ltd.     

Patent Hold‐Up and Antitrust: How A Well‐Intentioned Rule Could Retard Innovation

Licensing technology essential to a standard can present a hold‐up problem. After designing new products incorporating a standard, a manufacturer could be confronted by an innovator asserting patent rights to essential technology. This hold‐up problem can be solved with a damages remedy provided by antitrust or some other body of law, but a damages remedy can reduce the innovator's licensing revenue and thereby retard innovation. The availability of an ex post damages remedy also alters the licensing terms in ex ante bargaining with the result that fewer socially beneficial R&D projects are undertaken.     

From ‘Entering into a Firm’ to ‘Entering into a Profession’: An Anthropological Approach to Changing Personhood in Japan

Drawing on extensive ethnographic fieldwork, the article uses discourse analysis to examine the social dynamics involved in the construction of personhood in Japan. While the gap between powerful discourse and lived reality is a well‐documented phenomenon, there is little systematic empirical research on how to integrate individual and social levels of analysis in this process. By contrasting discourse from above and from below, the article illuminates power asymmetry and the resulting tension between discursive freedom and social exclusion among disadvantaged groups.     

How to Overcome Pro‐Change Bias: Incorporating Passive and Active Innovation Resistance in Innovation Decision Models

Adoption literature is largely subject to a pro‐change bias; researchers mainly assume that consumers are open to change and thus interested in evaluating new products. However, consumers often reject innovations without considering their potential, such that the adoption process ends before it really has begun. The present study instead argues that innovation resistance, prior to product evaluation, is a regular consumer response that must be recognized and managed to facilitate new product adoption. The authors suggest differentiating passive from active innovation resistance. While passive innovation resistance results from a consumer's generic predisposition to resist innovations prior to new product evaluation, active innovation resistance is an attitudinal outcome that follows an unfavorable new product evaluation. This study also extends extant innovation decision models by describing how passive and active innovation resistance emerge and how they affect decision‐making in later stages of the process.