Labor Productivity Of Firms Research Articles

Credit stimulus and corporate excess employees

This study examines how the large and unexpected Chinese credit stimulus in 2008 affects firms' labor decision. Using a large sample of industrial firms, we find that state-owned enterprises tend to hire more employment than their counterparts after the credit stimulus. Mechanism analysis shows that the credit stimulus package is followed by lower financing costs and more bank loans for the state-owned enterprises, enhancing the degree of their excess employment compared with their counterparts. Moderating effect tests suggest that the overemployment effect is stronger in provinces with a high unemployment level, where the political leaders have stronger promotion incentives, in industries that are selected as the key stimulating industry, and in provinces with higher bank competition level, but weaker in provinces with higher marketization level. Finally, we find that the firm's overemployment caused by the credit stimulus plans decreases firm labor productivity. Overall, our findings shed light on how credit policy influence firms' labor decision and offer important implications for regulators.

Aging workforce, wages, and productivity: Do older workers drag productivity down in Korea?

Older workers stay longer in the labor market due to increasing life expectancy and retirement age. The aging workforce is perceived to create challenges to the current labor markets including productivity, yet our understanding of how the demographic transition and aging workforce affect the labor market and firms’ productivity is limited. Using the 2007–2019 Korean Workplace Panel Survey, we examine the effect of the workforce age structure on wage per worker and labor productivity of firms. The workforce age structure is disaggregated into three age groups: young workers (16–29 years), prime-age workers (30–49 years), and older workers (50 years and higher). Wage and value-added per worker are selected as measures of labor costs and productivity. The ordinary least squares regression results suggest no statistically significant association of firms’ wage per worker and labor productivity with the share of young workers but a negative association with the share of older workers. Yet, in some regions, sectors, and firms, older workers show comparable productivity to prime-age workers while their wages are lower than that of prime-age workers. Its association is particularly apparent in the unstable and low-wage sectors, small to medium size firms, and the Capital Region (Seoul and surrounding areas including Incheon megacity and Gyeonggi province) and six other megacities. Once the difference-GMM addresses the potential endogeneity issue, we find no association between the shares of both young and older workers and firms’ wages and productivity.

Why Are Firms in High-income Economies More Productive than in Middle-income Economies? Decomposing the Firm Labor Productivity Gap

Why Are Firms in High-income Economies More Productive than in Middle-income Economies? Decomposing the Firm Labor Productivity Gap

Green Innovation Strategies, Innovation Success, and Firm Performance—Evidence from a Panel of Spanish Firms

This paper examines the effects of adopting types of green innovation strategies on a firm’s innovation success and performance. The empirical analysis applies propensity score and kernel matching to a Spanish firm panel during 2008–2016. The results provide robust evidence that the pursuit of green innovation strategies increases a firm’s innovation success in the form of higher turnover due to new-to-market, or radical product innovation compared with innovating firms that do not adopt green innovation strategies. However, despite this positive effect on the competitiveness of firms that adopt green innovation strategies, they are generally little able to benefit in terms of their performance. While the results suggest improvements in the labour productivity of firms that adopt general green innovation strategies, no effects are experienced by firms that adopt green product innovation strategies. Moreover, the results suggest the absence of any firm performance benefits in terms of turnover or employment growth. These findings indicate that markets do not provide ‘win-win’ situations, and policy intervention is critical to support green innovation strategies.

Ultra-fast broadband access and productivity: Evidence from Italian firms

We study the impact of ultra-fast broadband (UFB) infrastructures on the total factor productivity (TFP) and labor productivity of firms. We use unique balanced panel data for the 2013–2019 period on incorporated firms in Italy. Using the geographical location of the firms, we merge firm-level data with municipality-level information on the diffusion of UFB, which started in 2015. We derive consistent firm-level TFP estimates by adopting a version of the Ackerberg et al.’s (2015) method, which also accounts for firm fixed effects. We then assess the impact of UFB on productivity and deal with the endogeneity of UFB by exploiting the physical distance between each municipality and the closest optical packet backbone node. Our results show an overall positive impact of UFB on productivity. Services companies benefit the most from advanced broadband technologies, as do firms located in the North-West and South of Italy. We further decompose the impact of full-fiber networks from mixed copper-fiber connections and find that the former significantly contribute to enhancing firm productivity. Finally, by exploiting Labor Force Survey data, we provide suggestive evidence that productivity increases from UFB might be related to structural changes at the workforce level.

When are acquisitions a viable catch-up strategy? Some empirical evidence from China

How emerging-market firms can catch up with forerunners from advanced economies is a key issue in the economic and technology literature. Research has suggested that acquisitions are a viable tool for firms in emerging markets to reduce the productivity gap with global leaders, but the empirical evidence on this matter is still far from conclusive. Contributing to this debate, this paper examines the impact of cross-border vs. domestic acquisitions on the labor productivity of firms across different sectoral environments. Studying the acquisitions pursued by Chinese listed firms over one decade, we find that cross-border acquisitions are positively associated with firms' labor productivity and that this effect is particularly strong in high-tech sectors and among leading firms. We also find that domestic acquisitions are positively associated with firms’ labor productivity and that this effect is particularly strong in low-tech sectors and among laggards. We further investigate the mechanisms underlying the acquisition–productivity link and contend that “technological innovation” is the primary mechanism by which acquisitions enhance firm productivity in high-tech sectors, whereas “enhancing operating efficiency” is the primary mechanism by which acquisitions enhance firm productivity in low-tech sectors.

Innovation strategies and productivity growth in developing countries: Firm-level evidence from Pakistani manufacturers

We examine the determinants of product, process, and organizational innovations, and their impact on firm labor productivity using data from a unique innovation survey of firms in Pakistan. We find significant heterogeneity in the impact of different innovations on labor productivity: Organizational innovation has the largest effect followed by process innovation. But unlike much of the literature, we found a negative impact of product innovation suggesting a disruption effect of new products. We find a strong impact of engaging in knowledge creation on product and process innovation. We also find that external knowledge networks and innovation cooperation play no significant role in firms’ decision to engage in innovation and its intensity, however, vertical linkages with suppliers (clients) promote product (process) innovations. Foreign competition has a negative effect on product innovation and a positive effect on organizational innovation. Exposure to foreign markets both in term of exporting and quality standard certification leads to better innovation performance.

Mobile money, traditional financial services and firm productivity in Africa

Despite the successful adoption of mobile money in sub-Saharan Africa, there is limited empirical evidence on how mobile money interacts with traditional financial services and the implications of this interaction for firm performance. In this paper, we investigate the effects of mobile money use and access to traditional financial services on labour productivity and test whether mobile money can accentuate the impact of traditional financial services on productivity. Using firm-level data from the World Bank Enterprise Survey across 14 sub-Saharan African countries, we find a significant effect of access to traditional financial services on firm labour productivity but no robust significant direct effect of mobile money use on labour productivity. However, when access to traditional financial services, particularly access to bank capital, is combined with mobile money, there is a productivity improvement. We find similar evidence in the sample of small and medium-sized enterprises. The productivity gain from combining mobile money use with traditional financial service is also found within firms from East Africa and especially firms from other regions where mobile money is emerging, but uptake is relatively low. Overall, the evidence suggests that mobile money can heighten the effects of traditional finance, and we attribute this effect to a reduction in transaction costs. The findings in this paper support that both mobile money and traditional financial services should be promoted at the firm level.

Statistical Properties of Labor Productivity Distributions

We employed the latest version of the world’s largest corporate financial database and identified the following three statistical properties of the physical labor productivity of firms: 1) The probability density function (PDF) of labor productivity follows power-law and log-normal distributions in the large- and mid-scale ranges. 2) Time-reversal symmetry was observed in the correlation of labor productivities in two consecutive years, and the initial-value dependence of the growth-rate distribution has regularity. These two properties accurately derive the above two kinds of PDFs. 3) The dependence of labor productivity distribution is negligible on the number of employees. This indicates a slight difference in the distribution of labor productivity among large-, mid-, and small-sized firms.

High-performance work practices and labour productivity: a six wave longitudinal study of UK manufacturing and service SMEs

This study utilises both evolutionary resource-based view (EBRV) and open systems theory to investigate the long term impact of high-performance work practices (HPWPs) on labour productivity in UK manufacturing and service sector SMEs. We investigate both forward and reverse causality and the moderating role of owner-manager strategic orientation, and whether such relationships are influenced by firm size and age. Utilising a longitudinal data set (a balanced panel) comprising 284 UK SMEs and six waves of data collection over a ten-year time period (2007–2017), we found support for both forward and reverse causality. Prior investments in HPWPs were positively associated with subsequent firm labour productivity and prior labour productivity was positively associated with future investment in HPWPs. The size of the estimated coefficients for these relationships were consistently larger for small firms than for medium sized firms, however there were not significant for firm age. We additionally found that owner-manager strategic orientation towards HR moderated both forward and reverse causality relationships and that this relationship increased over time. The size of the estimated coefficients was larger in small firms compared to medium-sized firms. Overall, our findings support calls to investigate both forward and reverse causality and to better understand potential differences between small and medium sized firms.

The microeconomic effects of temperature changes

This paper uses financial data from listed Chinese manufacturing companies, combined with meteorological data, to estimate the microeconomic effects of temperature changes. By constructing seasonal average temperatures, we find that average summer temperatures significantly reduce the financial performance, while average winter, spring, and autumn temperatures do not have a significant effect on the corporate financial performance. We further find that the effect of temperature changes on corporate financial performance is nonlinear through temperature bins variables. Both extreme low temperatures (<-12 °C) and high temperatures (>27 °C) have a negative impact on corporate financial performance. The mechanism tests find that high temperatures not only reduce the labor productivity of firms, but also increase the corporate adaptation actions, leading to increased adaptation costs, crowding out productive funds and causing a capital mismatch. Further heterogeneity analysis confirms that the magnitude of the negative effect of temperature changes is limited by the enterprise nature and the region in which the firm is located. The financial performance of state-owned enterprises, firms in the south and developed regions are more vulnerable to high temperatures. This study provides a policy basis for mitigating the negative effects of temperature changes and provides new empirical evidence for climate governance.

Innovation, gender, and labour productivity: Small and medium enterprises in Vietnam

• This study finds that innovation increases firm labour productivity in Vietnamese SMEs. • Female-controlled firms are not significantly less productive than male-controlled firms. • Female-controlled firms are less likely to innovate than male controlled firms. • Government assistance does not directly improve firm productivity. • Government assistance does enhance firm productivity indirectly by increasing the probability of innovation. This study undertakes an empirical analysis of the links between gender, innovation and firm labour productivity in Vietnamese Small and Medium Enterprises (SMEs). Specifically, we analyse whether female-controlled firms are more or less productive, than male-controlled firms. We also analyse whether female-controlled firms are more or less innovative than male-controlled firms. The present study goes further than most others in this area by allowing for endogenous selection into innovation, and by decomposing the productivity differential between innovators and non-innovators into the parts due to the differences in endowments and in technology. We show that while female-controlled firms are less likely to innovate, they are not less productive than male-controlled firms, once the role of innovation is controlled for. We also show that innovators are about 23% more productive than non-innovators, with over three quarters of this gap being due to innovators possessing better technology. An important contribution of our analysis is therefore to show that innovators are more productive than non-innovators mainly due to the use of different technology, not because they have better endowments. As the number of females starting or running new businesses is higher than males in developing countries, including in Vietnam, it follows that female entrepreneurship plays an important role in economic growth in emerging economies. Our analysis of the gender gap in business performance and innovation provides insights that assist with formulating entrepreneurship-related polices to assist this economic growth.

High-performance work practices, socioemotional wealth preservation, and family firm labor productivity*

Despite growing research on the effect of high-performance work practices (HPWPs) on family firm performance, the implications of socioemotional wealth (SEW) preservation remain ambiguous. This stems from SEW preservation being used primarily as an explanatory construct and assessed indirectly rather than directly in empirical studies. To address this research gap, we draw upon organizational control and signaling theories to determine the “true” interaction between HPWPs and SEW preservation for labor productivity. Specifically, competing hypotheses are presented to determine if this interaction supports complementarity or substitutability. Using a sample of 124 Spanish family firms and a direct measurement of SEW preservation, our results provide support for substitutability, suggesting that family firms can realize higher labor productivity when HPWPs are fully implemented and commitment to SEW preservation is low, and vice versa. These findings have important implications for family firms, given HPWPs’ inverse relationship with SEW preservation regarding labor productivity. JEL CLASSIFICATION J24, L20, L21, L26, M12_M12, M54_M54, O15

When does remote electronic access (not) boost productivity? Longitudinal evidence from Portugal

Whether or not the option to work remotely increases firm labour productivity is theoretically ambiguous. We use a rich and representative sample of Portuguese firms, and within-firm variation in the policy of remote electronic access – a key prerequisite for remote work – over the period 2011–2016, to empirically assess the relationship between remote access and firm labour productivity. Based on estimations of models with firm-fixed effects, we find a significantly negative association, on average, between remote access and productivity. However, we also find a substantial degree of heterogeneity across different categories of firms, where the association between remote access and productivity is significantly positive for firms that undertake R&D activities. Our findings suggest that the possibility of working remotely, as proxied by the possibility of remote access, is more likely to be harmful for productivity in non-exporting, small firms that do not do R&D, and that employ a workforce with a below-average skill level.

THE SPILLOVER EFFECTS OF FDI ON LABOR PRODUCTIVITY OF FIRMS: EVIDENCE FROM THE FIVE PRIORITY MANUFACTURING INDUSTRIES IN INDONESIA

This study aims to investigate the effects of FDI spillover on labor productivity of the firms in the five priority manufacturing sector industries in Indonesia, namely food and beverages, textiles, wearing apparel and footwear, chemicals and pharmaceuticals, electronics, and automotive and transport equipment industries. Using unbalanced firm-level data from 2000 to 2015, we find positive spillover effects in the horizontal linkages, which measure the presence of foreign firms on the labor productivity of local firms in the same industry. However, the effects of FDI on the labor productivity of domestic in backward linkages shows negative results, which means foreign buyers fail to give benefits to domestic suppliers. Moreover, the relationship between foreign suppliers and domestic buyers in the forward linkages also show negative spillover effects. These findings are also in line when the analyses are disaggregated into each industry, except for the electronics industry. Based on the different results of the three linkages of spillover effects, our findings suggest that the FDI spillover has not provided comprehensive benefits for local firms.

Does foreign investment enhance domestic manufacturing firms’ labour productivity? Evidence from a quantile regression approach

We provide new insights into the relationship between foreign investment and the labour productivity of domestic firms in the Vietnamese manufacturing industry. Using quantile regression analysis of a panel of firm-level data over a 2010–2015 study period, we find that the presence of foreign investment has a positive impact on domestic firm labour productivity through competition effects within the industry at the middle and high quantiles. We do not find significant evidence to support a positive relationship between foreign investment in downstream sectors and domestic firm labour productivity in upstream sectors, however. There are some indications that suggest a positive relationship between foreign suppliers in upstream sectors and labour productivity of domestic buyers in downstream sectors at the low and middle quantiles.

The effect of foreign direct investment on firm labor productivity: Does the country of origin of the FDI matter?

Many papers have analyzed the effects of foreign acquisition on firm productivity, articulating its positive impacts. However, an important issue remains: is there a general foreign acquisition effect, or is there any heterogeneity in the effects? This paper reports on the analysis of over 3,400 majority foreign acquisitions in Hungary. The main result (which exists in a propensity score matching sample as well) of the difference-in-differences analysis is that only acquirers from higher income countries foster labor productivity significantly — and this effect increases with the income gap between Hungary and the country of origin -, while acquirers from lower income countries do not induce statistically significant effects.

Do high‐quality local institutions shape labour productivity in Western European manufacturing firms?

AbstractWe investigate the extent to which regional institutional quality shapes firm labour productivity in Western Europe, using a sample of manufacturing firms from Austria, Belgium, France, Germany, Italy, Portugal and Spain, observed over the period 2009–2014. The results indicate that regional institutional quality positively affects firms' labour productivity and that government effectiveness is the most important institutional determinant of productivity levels. However, how institutions shape labour productivity depends on the type of firm considered. Smaller, less capital endowed and high‐tech sectors are three of the types of firms whose productivity is most favourably affected by good and effective institutions at the regional level.

Does Remote Work Improve or Impair Firm Labour Productivity? Longitudinal Evidence from Portugal

Whether or not the use of remote work increases firm labour productivity is theoretically ambiguous. We use a rich and representative sample of Portuguese firms, and within-firm variation in the policy on remote work, over the period 2011-2016, to empirically assess the causal productivity effect of remote work. Our findings from estimations of models with firm-fixed effects suggest that the average productivity effect of allowing remote work is significantly negative, though relatively small in magnitude. However, we also find a substantial degree of heterogeneity across different categories of firms. In particular, we find evidence of opposite effects of remote work for firms that do not undertake R&D activities and for firms that do, where remote work has a significantly negative (positive) effect on labour productivity for the former (latter) type of firms. Negative effects of remote work are also more likely for small firms that do not export and employ a workforce with a below-average skill level.

Labor Productivity In Emerging Markets: Evidence From Brazil, China, India, And Russia (BRIC)

Despite the great amount of attention to emerging markets, much still remains unknown about firm performance in emerging economies. To fill this gap, this study aims to investigate factors that influence labor productivity of firms in Brazil, China, India, and Russia (BRIC countries). This study focuses on features of business environments of emerging markets such as informality, corruption, foreign ownership, and external audit. Using a cross-national sample of 8,885 firms from the World Bank Enterprise Surveys dataset, we find that informality is negatively associated with labor productivity, while corruption and external audit are positively related to labor productivity. Implications will be discussed.