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The Impact of Worker Bargaining Power on the Organization of Global Firms

Carluccio, JF and Bas, M (2015) The Impact of Worker Bargaining Power on the Organization of Global Firms Journal of International Economics, 96 (1). pp. 162-181.

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Abstract

Do variations in labor market institutions affect the cross-border organization of the firm? Using firm-level data on multinationals located in France, we show that firms are more likely to outsource the production of intermediate inputs to external suppliers when importing from countries with high worker bargaining power. This effect is stronger for firms operating in capital-intensive and differentiated industries. We propose a theoretical mechanism that rationalizes these findings. The fragmentation of the value chain weakens the workers' bargaining position, by limiting the amount of revenues that are subject to union extraction. The outsourcing strategy reduces the share of surplus that is appropriated by the union, which enhances the firm's incentives to invest. Since investment creates relatively more value in capital-intensive industries, increases in worker bargaining power are more likely to be conducive to outsourcing in those industries. Overall, our findings suggest that global firms choose their organizational structure strategically when sourcing intermediate inputs from markets where worker bargaining power is high.

Item Type: Article
Divisions : Faculty of Arts and Social Sciences > Surrey Business School
Authors :
AuthorsEmailORCID
Carluccio, JFUNSPECIFIEDUNSPECIFIED
Bas, MUNSPECIFIEDUNSPECIFIED
Date : 1 May 2015
Identification Number : 10.1016/j.jinteco.2014.12.008
Related URLs :
Additional Information : NOTICE: this is the author’s version of a work that was accepted for publication in Journal of International Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of International Economics 96 (1)2015, DOI 10.1016/j.jinteco.2014.12.008
Depositing User : Symplectic Elements
Date Deposited : 13 May 2015 10:57
Last Modified : 13 May 2015 10:57
URI: http://epubs.surrey.ac.uk/id/eprint/807354

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