The impact of state-owned capital on labor cost stickiness in private firms: Evidence from China

Abstract

Cost stickiness is common in enterprise production and can significantly affect internal resource allocation. Past studies suggest that cost stickiness is more prominent in state-owned enterprises (SOEs). However, these studies have not addressed the impact of state-owned capital (SOC) on the cost stickiness of private enterprises. This study examined the effect of SOC on labor cost stickiness in private firms, employing data from China's private listed firms from 2010 to 2019. Empirical results show that SOC participation in private firms concurrently increased adjustment costs and decreased financing constraints. SOC also significantly exacerbated labor cost stickiness. This relationship was more evident among ordinary employees, competitive industries, and China's central and western regions. The findings demonstrate that SOC participation can harm corporate productivity in the short term but can benefit corporate innovation in the long term.