OUTSIDE OWNERSHIP AND WORKERS' EARNINGS AND TENURE

Increasing aggregate concentration in the economy has increased attention to the issues surrounding the outside ownership of enterprises. Outside ownership entails both industrial diversification and various forms of conglomerate ownership and represents an important new direction for studies of economic sociology and labor market segmentation. The article shows that the influence of four measures of outside ownership on worker's earnings and tenure is largely, though not universally, negative. Outside ownership tends to suppress earnings otherwise accruing to workers in companies with high levels of unionization, rapid growth, and high profits. Workers' tenure is influenced negatively by some types of outside ownership but positively by others. Tenure is reduced in subsidiary firms and in industries predominately owned by other industries due to reduced union influence on job tenure in these settings. Average tenure is increased in companies that are spread across several industries. These findings provide little support for dual labor market theories and other economic theories that argue that workers benefit from the market power of their employing organizations. Instead, the findings provide support for theories that stress the dangers to workers' fates arising from the increasing dominance of financial management in economic decision making.     

The institutional antecedent to firms’ interorganizational network portfolios: Evidence from China

Although the amount of research on interorganizational networks has increased significantly in recent years, few studies have examined the antecedents to interorganizational network portfolios—organizations’ configuration of their relationship networks with other organizations. To address this gap, this study examines how firms’ interorganizational network portfolios vary across three types of ownership structures (i.e., state-owned, private, and multinational enterprises) in China. Cluster analysis of the data on 212 leading firms operating in China revealed two types of network portfolios firms maintain. Specifically, firms maintaining robust cross-sector portfolios had more extensive networks with organizations in the nonprofit and public sectors than firms maintaining limited cross-sector portfolios. Moreover, regression results suggested that firms across different ownership structures had distinct numbers and types of organizational partners, particularly nongovernmental organization (NGO) partners. Theoretical and practical implications are derived from the findings.     

RETURNS TO INVESTORS IN STOCKS IN NEW INDUSTRIES

We examine investors' returns from publicly traded stock in new industries associated with major changes in transportation and communication in the United States. Return distributions during the development of own‐brand personal computers, airlines, airplane and automobile manufacturers, railroads, and telegraphs reveal three general characteristics. A few companies generate outstanding returns, many firms fail, and returns are volatile. Firms' expected returns are higher than market returns for three of the five industries. Sharpe ratios and Jensen's alphas for portfolios of each new industry indicate that portfolios of stocks in firms in new industries are not an obvious bad deal. (JEL G1, G12, N2, N21, N22)     

ENTREPRENEURIAL ENTERPRISES, ENDOGENOUS OWNERSHIP, AND THE LIMITS TO FIRM SIZE

This paper develops a simple model of entrepreneurial enterprises. The analysis differs from traditional work on entrepreneurship by analyzing why entrepreneurial activities are typically conducted in small firms owned by the entrepreneur. I argue that ownership incentives are an advantage of small firms. When the probability of success of an economic activity becomes small, if becomes costly for large firms to commit to strong incentives, and small worker-owned firms emerge. The paper discusses application of the theory to innovation, wild-cat oil exploration, restaurants and retail trade, professional practices, salesmen, and franchising.     

The Political Economy of Employee Ownership in the United States: From Economic Democracy to Industrial Democracy?

This study examines the development of economic democracy in the United States since the 1700s with particular emphasis on the last 30 years. The particular focus is on employee ownership, although the phenomenon of profit sharing receives some attention. The nature of research and documentation on the subject is reviewed. The study concludes that research in the area has emphasized narrative studies of particular companies and sectors until the 1980s. At that time the support for the concept by the US Federal Government created reporting requirements for companies to the US Department of Labor and the US Internal Revenue Service (the taxation authority) and the US Securities and Exchange Commission. These data-sets have made systematic research on the phenomenon possible. Results of the first national random sample of employed individuals and work sites on the incidence of employee ownership and profit sharing are presented. Finally, we conduct a political economic analysis of the phenomenon. We demonstrate that, despite the growth of employee ownership in particular, a form of employee ownership has developed which encourages workers to use their savings to buy stock in their companies. This form dominates employee ownership in terms of the number of workers, firms, and dollar assets involved. Nevertheless, there is significant employee ownership in a group of closely held firms that use traditional ESOPs (Employee Stock Ownership Plans) and in a group of publicly traded high technology companies that use broad-based stock options. These two sectors offer fertile territory for the development of both economic democracy and nascent forms of industrial democracy.     

The Effect of Absentee Ownership on Local Employment Change

Abstract

To determine whether absentee-owned firms destabilize local economies, we examine the relationship between absentee ownership of manufacturing companies and employment change in manufacturing for 109 Pennsylvania towns. This issue arises because some earlier studies find that corporate connections through absentee-owned firms are positively related to local employment growth, whereas other work claims that locally owned operations are more stable. We attempt to reconcile these findings by arguing that absentee ownership is destabilizing only in the case of non-conglomerate firms. Our results show that absentee ownership in fact increases the closure rate of firms, thereby negatively affecting manufacturing employment change. Yet, this relationship differs by the parent company's organizational structure. Employment in branches of non-conglomerate firms is more detrimental than employment in branches of conglomerates — an important qualification of the argument that the “conglomeratization” of advanced industrial societies negatively affects communities.     

Privatisation Effects: Some Evidence from Serbia

This paper analyses basic outcome and effects of the privatisation process in Serbia. The first two parts of the paper deal with general achievements of the newest privatisation plan adopted in 2001. We present a brief background of the results of the privatisation process, analysing changes in the structure of enterprises by ownership status, the number of privatised firms, revenues earned through privatisation, the rate of successful transactions, and other relevant privatisation indicators. The paper continues with an analysis of a survey conducted within a sample of Serbian enterprises offering some evidence about performance, competition, and restructuring within different types of firms: socially owned, privatised, and new private. Contrary to the broadly accepted statement that new private firms are leading in transition economies, according to our estimation of the effects of the ownership type on firm performance, it appears that the privatised sector seems to be more active. A comparison of the survey results with findings for three neighbouring countries indicates that there is no general conclusion about the way how ownership status of a firm affects its performance in a transition economy. Although conclusions drawn from our survey analysis should be regarded as preliminary and limited by the quality of survey data and could not be generalised for the privatisation process in other transition countries, the findings we present, including the comparison made with other economies, could contribute to the understanding of both privatisation effects in general and effects remarkable for the Serbian economy.      

DIVIDEND POLICY IN REGULATED NETWORK INDUSTRIES: EVIDENCE FROM THE EU

We study the dividend policy of firms in regulated network industries, focusing on the impact of different regulatory regimes and government control. We link payout and smoothing decisions to different regulatory mechanisms (cost‐based vs. incentive regulation) and state versus private ownership. We test our predictions on a panel of listed European electric utilities, accounting for potential endogeneity of the choice of regulatory and ownership patterns. We find that incentive‐regulated firms smooth their dividends less than cost‐based regulated firms and that they report higher target payout ratios. Consistent with the interest group theory of regulation, we find that incentive regulation schemes are less likely when the state is still an important shareholder in the sector. Additionally, our results show that government control undermines the efficiency‐enhancing effects of incentive regulation on dividend policy, for example, lower smoothing is only due to private firms. (JEL G35, L51, L32, L9)     

A structural theory of interlocking corporate directorates

A theory is proposed that explains where interlocking corporate directorates should appear between sectors of an economy, where they should not appear, and the profitability of efficient corporate interlocking. Taking the sector of an economy as the unit of analysis, interlocking directorates are cast as strategically created constraints on those sectors of the economy most “problematic” for obtaining profits in a given industry of firms. The extent to which each sector of the American economy is problematic for obtaining profits in two-digit and four-digit manufacturing industries is estimated from research linking industry profits with the form of the pattern of relations defining the industry as a position in the network of dollar flow transactions given in the 1967 Input-Output Study for the United States. A two-stage process is described for sampling firms representative of large corporations involved in American manufacturing. Measures of alternative strategies for interlocking across sectors are described. Two classes of hypotheses are derived: (1) Firms in an industry should interlock with firms in some other sector in proportion to the extent to which the sector constrains the industry's profits. (2) Controlling for production and market differences, the ability of firms in an industry to obtain unusually high profits reflects their success in creating interlocks with those sectors most problematic for their industry's profits.     

Teaching and Learning Guide for “Gender In/equality in Worker‐owned Businesses”

This teaching and learning guide accompanies the article, “Gender In/equality in Worker‐owned Businesses,” which reviews existing literature on gender in businesses with employee stock ownership plans, worker cooperatives, and communes. Worker ownership has attracted renewed interest as a possible solution to the social and economic problems confronting our society. In worker‐owned businesses, workers have greater control over what they produce, how they produce it, and how they are compensated. If workers ran things themselves, so the story goes, jobs would be better and workplaces would be more equal. What do we actually know about work in alternative organizations? Do women fare better? Can they offer alternatives or solutions to the gender inequality that permeates working life? This teaching and learning guide provides supplemental information to facilitate the use of this article in the classroom. This includes a list of recommended readings, online resources, a sample syllabus, focus questions, and project suggestions.     

FROM HONEYMOON TO DIVORCE: INSTITUTION QUALITY AND FOREIGN INVESTORS' OWNERSHIP CONSOLIDATION IN CHINA

In China, joint ventures (JVs) between foreign investors and Chinese local firms were the most popular form of foreign affiliates before 2001. Over time, with policy space to operate as foreign wholly owned (WOs), many foreign investors in JVs chose to consolidate ownership and turned JVs into their WOs. Here, we examine how institution quality affects foreign investors' JV‐to‐WO ownership consolidation odds. For each province‐year, we construct an institution quality index from the business and judicial quality indicators, and further compute a relative quality index to highlight provincial variations. Using more than 43,000 JVs operating in China's 30 provinces over 1998–2007, we find that increases in institution quality decrease the odds of foreign investors to divorce their Chinese local partners. The odds for foreign investors in JVs to consolidate ownerships are significantly higher if they operate in provinces with relatively weaker institution quality. The odds of foreign investors' JV‐to‐WO decision vary with JVs' local firms being state‐owned enterprises (SOEs) and non‐SOEs, with foreign investors' origins from Hong Kong, Macao, and Taiwan (HMT) and other regions (Foreign), and with foreign investors' initial equity positions. Our results are not driven by foreign direct investment policy shocks, and are robust to alternative measures of institution quality. (JEL F23, L23)     

Defining the co-operative difference

The paper argues that co-operative firms play a set of roles in market economies, based on the co-operative values and principles that are rarely noted in economic literature. Among other, those roles are to internalize market externalities, to serve as laboratories for social innovation, to espouse social entrepreneurship, to promote ethical business practices, and to aid in development. While economic literature has been focused primarily on the ownership and control structure as a source of the difference, we argue that this focus paints an incomplete picture. The principles of co-operation may supply additional insights in addressing questions why co-operatives may thrive in areas of low labour mobility, prevalent market failures, oligopoly markets, and labour intensive industries. They may also offer insights into strategies and survival in global markets of successful co-operative firms.     

Restructuring of the Financial Industry: The Disappearance of Locally Owned Traditional Financial Services in Rural America

Restructuring in the financial services industry has altered the relationship between small business owners and capital. In the past small businesses have relied on relational, or soft data, lending from locally owned banks for capital. The proliferation of absentee‐owned local branch networks brought standardized practices, thus eliminating the autonomy of local loan officers to utilize soft data in loan decisions. In this article we examine the changes in the percentage of traditional financial services that are locally owned in three county types: metropolitan, micropolitan, and noncore. We utilize the Longitudinal Business Database at the U.S. Census Bureau Center for Economic Studies. We examine changes in local ownership of traditional financial services between 1976 and 2007. We find that the rate of decline of local ownership has been greatest in the noncore (most rural) counties. We also explore to what extent these patterns are related to the emergence of alternative financial services during the same period. We find that such alternative services are growing in all three county types, but at rates not significantly different than the population growth for these county types. We supplement our analysis with data from qualitative interviews with small business owners throughout rural Texas. We conclude with a discussion of implications and plans for future research.     

WHERE ARE THE WOMEN ENTREPRENEURS? BUSINESS OWNERSHIP GROWTH BY GENDER ACROSS THE AMERICAN URBAN LANDSCAPE

This study identifies the determinants of growth for male and female business ownership in a subset of U.S. counties. The results indicate that there are important characteristic and behavioral differences between the male and female populations in each county that affect regional changes in business ownership for each gender. In particular, the education level of males and females as well as the local family structure impact the propensity for firms owned by each gender differently. A Blinder‐Oaxaca type decomposition, a novel approach in the context of regional outcomes, demonstrates that although the effect of characteristic differences is larger, the behavioral differences are key to narrowing the gender disparity in business ownership. (JEL L26, R2, R3)     

The global clothing production system: commodity chains and business networks

The global organization of the clothing industry has been the prime example of buyer‐driven commodity chains. However, previous empirical studies to substantiate Gereffi's assertion have been highly Western centric and predominantly based on the empirical evidence of American retailers and brand name companies. In this article I demonstrate that any clothing commodity chain has various influential factors, such as the national and global regulatory framework, the societal context of the leading firm, the fashion context of the products, as well as the actual brand ownership. Thus, the organization of clothing firms in the global economy can develop diverse intra‐sectoral commodity chain coordinations. Using a hypothetical clothing commodity chain as an example, I attempt to identify the individual commodity chains within which Indonesian clothing firms are embedded. Furthermore, I outline the ways in which Indonesian clothing firms were affected by the economic crisis of the late 1990s.     

Social Consequences of Employee/Management Buyouts: Two Canadian Examples From the Forest Sector*

Abstract Local control of natural resource processing facilities in small rural communities is often viewed as beneficial to community development. This paper employs social impact assessment tools to examine the social and economic effects of change in the ownership of forest products mills in two communities. Our analysis documents (1) the degree to which local ownership of the new, locally owned corporations led to local reinvestment of profits, and (2) whether the goals of the architects of these buyouts were realized: the maintenance of jobs, income, population, and a way of life. Overall, both communities were able to maintain jobs, population, and real estate values, and profits were reinvested in mill upgrades. After the buyouts, however, both communities experienced a rise and then a decline in community cohesion, and changes in local social and power relations, in which local ownership was short‐lived; benefits to relationships within the community were mixed.     

Finding environmentally important industry clusters: Multiway cut approach using nonnegative matrix factorization

This paper proposes an optimal combinatorial method for finding groups of industries with relatively large CO₂ emissions through industrial relations. Using an economic input–output table, we estimated a non-symmetric matrix describing how much CO₂ is emitted in producing the commodity of industry i, which was purchased to produce commodity of industry j, to meet the final demand for a specific commodity. A symmetric strength of relations matrix describing the CO₂ emissions associated with the industrial relations was further estimated using the non-symmetric matrix. The strength of relations matrix can be viewed as a representation of the supply-chain network of the final commodity. In this study, we estimated the strength of relations matrix associated with the final demand for automobiles and applied the multiway cut approach using nonnegative matrix factorization to the matrix in order to find environmentally important industry clusters in the Japanese automobile supply chain. According to our empirical results, the optimal number of industry clusters is 19, and 4 industry clusters are playing a key role in CO₂ emission reduction.     

Optimum Competitive Area: Romania's Economic Integration in Southeast Europe

This paper presents a factual exposition of an optimum competitive area, tentatively referred to as a certain pattern of spatially defined areas conducive to competitive development for industries or firms in such a way that benefits from competition are maximized. This argument articulates around Romania's regional position and concludes that the most valuable source for enriched competitive advantages resides in its integrative process in Southeast Europe. There are economic facts that explain the range of industries and scope of businesses that emerge as main drivers of changing competitive advantages. This economically self-supporting space of competitive advantages basically rests on a set of five observations relative to the following facts: business strategies are more easily conceived; the value chain is more valuably exploited; the role Romania plays as a test market; the existence of spillover effects of political arrangements; and the existence of speculative returns and attractive growth rates of an emergent market. The conclusions take stock of the implications to conceive in specific terms that deliberate policies which would appear as necessary from this economic and business perspective.     

Cultural differences in an interorganizational network: Shared public relations firms among Japanese and American companies

This article investigates the impact of national culture on interorganizational relationships among the organizations. Thirty-five companies which have stock offerings in U.S (17 Japanese and 18 American) were matched by their business types. The interorganizational network was defined as the number of shared public relations firms among the companies.A network analysis revealed that the network of shared public relations firms was loosely connected and American companies were more central. The companies were generally clustered into two groups, one composed of the Japanese companies and another of the American companies. However, the results also showed that some companies that had the same business type were more tightly clustered than others within the group. These results indicated that the network structure of shared public relations firms was influenced by the differences in national cultures as well as the companies' business types.     

Who Among the Elderly Owns Stocks? The Role of Cognitive Ability and Bequest Motive

Conventional advice is to reduce risky investments as one ages. Such a generalized focus on risk avoidance may be inappropriate for elderly with longer life spans and those with financial goals that extend beyond their lifetime. To better understand risky asset holdings among the elderly, we investigated the effect of cognitive ability and bequest motive on stock ownership and stock purchase. Using the 2004 wave of the Health and Retirement Study, we found that one-third of elderly households held stocks and 36% of those elderly stockowners had recently acquired stocks. The respondent??s cognitive ability and bequest motive were strongly related to stock ownership. Among those who owned stock, a bequest motive was positively related to a recent purchase of stocks.