Are there life cycles in labor-managed firms? : evidence for France

EUROPEAN UNIVERSITY INSTITUTE, FLORENCE

DEPARTMENT OF ECONOMICS

E U I W O R K I N G P A P E R No. 86/232

ARE THERE LIFE CYCLES IN

LABO R -M A N A G E D FIRMS? EVIDi

by

v ' À

}

Saul E

* & Derek C. J

**

R FRANCE

* Department o f Economics

London School o f Economics

** Department o f Economics Hamilton College, Clinton (N e w York)

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reproduced in any form without permission of the authors.

(C) Saul Est r i n & Derek C. Jones. Printed i n I t a l y in Jul y 1986 European Un i ve r s i t y I n s t i t u t e

Badia Fi esol ana - 50016 San Domenico ( F i ) - I t a l y

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A r e T h e r e L i f e C y c l e s ± n Lab o r - H an aged F.JLcag?

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But i n a l l c a s e s , as many h a v e not ed ( s e e , f o r e x a mp l e , I r e l a n d and Law (1 982) , S t e p h e n (1 984) , t h e e m p i r i c a l b a s e u n d e r l y i n g t h i s mo d e l i n g i s v e r y sl im. ^ To e n a b l e more i n f o r m e d t h e o r e t i c a l mo d e l i n g and to a s s i s t i n t he e m p l r i o a l a n a l y s i s o f l i f e c y c l e i s s u e s so as to p r o v i d e p o l i c y g u i d e l i n e s whi c h can a i d t h e e s t a b l i s h m e n t o f s t a b l e LMF s e c t o r s , t h e r e i s an u r g e n t need f o r a more r o b u s t b o d y o f f a c t u a l i n f o r m a t i o n . To empl oy a bo d y o f d a t a i n t h i s w a y - - f o r F r e n c h p r o d u c e r c o o p e r a t i v e s ( P C s ) - - i s t h e p r i n c i p a l o b j e c t i v e o f

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I n t h e n e x t s e o t l o n we b r i e f l y r e v i e w t h e key i n s t i t u t i o n a l f e a t u r e s o f F r e n c h PCs. T h i s i s f o l l o w e d by t h e main s e c t i o n in whl oh we p r o v i d e I n f o r m a t i o n on t h o s e v a r i a b l e s whl oh t h e o r i e s o f t he l i f e o y o l e and o u r p r e v i o u s work on Fr e n o h PCs s u g g e s t w i l l be o f most I n t e r e s t . To he l p i n t h i s t a s k , nu me r o u s T a b l e s and F i g u r e s a r e a s s e m b l e d . We t he n r e v i e w some o f t h e ma j o r t h e o r i e s o f t he l i f e o y o l e and e x a mi n e t he e x t e n t to wh l o h t h e i r p r e d i c t i o n s ar e c o n s i s t e n t wi t h t h e e v l d e n o e . I n a c o n o l u d l n g s e o t l o n we not e t h e i m p l i c a t i o n s o f o u r f i n d i n g s f o r f u t u r e t h e o r e t i c a l and e m p i r i c a l wo r k and c o n s i d e r some p o l i c y i m p l i c a t i o n s .

i i . In s t it u t io n a l Fr-ftinfcXQrk

s e t , we oommenoe by d e s c r i b i n g some key f e a t u r e s . F r e n o h PCs c o o p e r a t i v e s h a v e t r a d i t i o n a l l y b e e n c o n c e n t r a t e d I n t h r e e b r o a d s e c t o r s ; o o n s t r u o t l o n , p r i n t i n g and m e c h a n i c a l e n g i n e e r i n g . ^ I n 1970 t h e s e o o n t a i n 59 f , and 6J o f t h e f i r m s i n o u r s ampl e r e s p e c t i v e l y ; i n 1 979 t h e c o r r e s p o n d i n g f i g u r e s a r e 1(7%, 12){ and 7J. Ho we v e r , i n r e c e n t y e a r s t h r e e new g r o u p s , d i v e r s e c o n s u l t a n c y a g e n o i e s , g e n e r a l s e r v l o e s and e l e c t r i c a l s , h a v e g r o w n c o n s i d e r a b l y and now c o m p r i s e some 14$, 8$ and 9$ o f o u r s a mp l e r e s p e c t i v e l y . The r e m a i n i n g c o o p s a r e i n c l o t h i n g and f o o t w e a r , w o o d w o r k i n g and f o o d p r o c e s s i n g . The F r e n o h PC s e o t o r wa s v e r y d y na mi c d u r i n g t h e l a t e r y e a r s o f t h i s p e r i o d , w i t h some 80 new f i r m s b e i n g c r e a t e d b e t w e e n 1 978 and 1 979 as w e l l as a f e w c l o s u r e s . E n t r y wa s p a r t i c u l a r l y r a p i d i n t he c o n s u l t a n c y s e o t o r , w h e r e f i r m n u mb e r s i n c r e a s e d by some

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H5J i n t h e m e c h a n i c a l s e c t o r ( 3 9 J ) and i n t h e e l e c t r i c a l s e c t o r ( 3 1 > ) . I t wa s r a t h e r more s l u g g i s h i n s e r v i c e s ( 1 1 J ) and p r i n t i n g ( 9 J ) . On a v e r a g e , t h e o l d e s t c o o p s a r e i n p r i n t i n g and c o n s t r u c t i o n and t h e n e w e s t i n e l e c t r i c a l s and p a r t i c u l a r l y c o n s u l t a n c y . T h e r e i s , h o w e v e r , c o n s i d e r a b l e v a r i a t i o n among PCs wi t h r e s p e c t t o a v e r a g e a g e i n t he o l d e r s e c t o r s . Thus i n c o n s t r u c t i o n , 30'? o f f i r m s a r e l e s s t ha n 5 y e a r s ol d i n 1979 w h i l e i n t h e same y e a r 17 X a r e more t h a n 50 y e a r s o l d . I t i s a l s o t h e o a s e t h a t t h e a v e r a g e age o f the l a b o r f o r c e , d e n o t e d AVAGL, i s t y p l o a l l y h i g h e r i n o l d e r f i r m s . Thus i n a s t a t i s t i c a l l y s i g n i f i c a n t r e g r e s s i o n b e t w e e n t h e t wo, e s t i m a t e d on t h e e n t i r e d a t a s e t o f 5^1 o b s e r v a t i o n s f o r t he y e a r 1 979, t h e e s t i m a t e d p a r a m e t e r on t h e l o g a r i t h m o f a g e o f t h e f i r m was 0.035 wi t h a t - v a l u e o f 7 . 3 1*. The p a r t i a l c o r r e l a t i o n c o e f f i c i e n t b e t w e e n t h e ag e o f w o r k e r s and t h e ag e o f f i r m s i s 0. 318. So f a r as s i z e i s c o n c e r n e d , at the end o f t h e 1970' s c o n s t r u c t i o n f i r m s h a v e t h e l a r g e s t numbe r o f w o r k e r s ( d e n o t e d T L A B F ) , a r o u n d 60 on a v e r a g e , t h o u g h e l e c t r i c a l c o m p a n i e s w e r e not muoh s m a l l e r . Each s e c t o r has c o n s i d e r a b l e v a r i a t i o n i n the s i z e o f i t s l a b o r f o r o e . M e c h a n i o a l e n g i n e e r i n g and s e r v i c e c o o p s h a v e a r o u n d f o r t y w o r k e r s on a v e r a g e , p r i n t i n g c o o p s a r o u n d t h i r t y and t he r e l a t i v e l y s m a l l c o n s u l t a n c y f i r m s o n l y a r o u n d t en i n 1 978 and

s i x t e e n i n 1 979. The e l e o t r l c a l s e c t o r i s r e l a t i v e l y

o a p i t a l - i n t e n s i v e and l a b o r p r o d u c t i v e , wi t h a c a p i t a l - l a b o r r a t i o ( d e n o t e d VARAT) i n 1 979 o f some 50, 000 f r a n o s p e r he ad, and o u t p u t p e r head o f 120, 000 f r a n o s . The c a p i t a l - l a b o r r a t i o i n 1 979 i s some 30, 000 f r a n o s p e r head i n p r i n t i n g , and a r o u n d 1 5,000 i n the

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r e m a l n l n g s e o t o r s e x c e p t c o n s u l t a n c y wh e r e I t i s b e l o w 10,000 f r a n o s . L a b o r p r o d u c t i v i t y ( d e n o t e d VARAT1) s ho ws a s i m i l a r p a t t e r n , w h i l e o u t p u t p e r u n i t o f c a p i t a l d i s p l a y s t h e r e v e r s e o r d e r i n g , r a n g i n g f r om 6.3 i n t h e l a b o r - i n t e n s i v e c o n s u l t a n c y s e c t o r to 2.3 i n e l e c t r i c a l s . The a r t i c l e s o f i n c o r p o r a t i o n o f F r e n c h PCs e x p l i c i t l y s t i p u l a t e a minimum d e g r e e o f p r o f i t - s h a r i n g w i t h i ' t h e l a b o r f o r c e . At l e a s t 2 5% o f company p r o f i t s must be d i s t r i b u t e d to t h e w o r k e r s in eaoh y e a r , w h e t h e r o r not t he y a r e members, t h o u g h t h e p r e c i s e amount i s l e f t to t h e e n t e r p r i s e g o v e r n i n g b o dy . On a v e r a g e i n 1979#

b o n u s e s a r e l a r g e s t i n t h e e l e c t r i c a l s e c t o r , c o m p r i s i n g some 2000 f r a n c s p e r he ad, and s m a l l e s t i n t h e s e r v i c e s e c t o r . I n 1 979 b o n u s p a y me n t s r e p r e s e n t e d a b o u t 13$ o f t h e t o t a l i ncome f r o m work ( d e n o t e d PAY) o f t h e a v e r a g e w o r k e r in a F r e n c h PC. The minimum b o nu s p a i d i s z e r o b u t t h e maximum r i s e s to a l mo s t 40$ o f t o t a l i nc ome i n 1 979. The c o e f f i c i e n t o f v a r i a t i o n a c r o s s t h e s a mp l e i n 1 979 i s 259$.

F r e n c h c o o p e r a t i v e s a r e owned by t h e i r members, who a r e t y p i c a l l y w o r k e r s o r e x - w o r k e r s i n t h e f i r m . Me mb e r s h i p c o n f e r s r i g h t s i n company d e c i s i o n - m a k i n g v i a e l e c t i n g r e p r e s e n t a t i v e s to t he f i r m ' s g o v e r n i n g G e n e r a l A s s e m b l y on t he b a s i s o f o n e - m e m b e r

o n e - v o t e . The G e n e r a l A s s e m b l y d e t e r m i n e s t h e b r o a d o u t l i n e o f c o r p o r a t e p o l i c y , e s p e c i a l l y in l a r g e c o mp a n i e s ; d a y - t o - d a y a d m i n i s t r a t i o n i s d e l e g a t e d to a manag ement b o a r d . The l a w o nl y r e q u i r e s members to ho l d one s h a r e t h o u g h t h e f i r m o f t e n i m p o s e s a d d i t i o n a l f i n a n c i a l r e q u i r e m e n t s . Howe v e r , w o r k e r s do not h a v e to beoome member s to be e mp l o y e d i n t h e c o o p e r a t i v e and t h e r e f o r e to g a i n a c c e s s to t h e p r o f i t - s h a r i n g b o nus , and i n f a c t a r e l a t i v e l y

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l a r g e p r o p o r t i o n o f t h e l a b o r f o r c e do not Joi n. The p r o p o r t i o n o f w o r k e r s who a r e membe r s o f t h e f i r m ( d e n o t e d P A V M) , v a r i e s f r o m a r o u n d 7 0 f on a v e r a g e i n t h e o o n s u l t a n o y and p r i n t i n g s e c t o r s to b e l o w 50$ i n t h e c o n s t r u c t i o n i n d u s t r y . C a p i t a l o w n e r s h i p b e y o n d t h e s t i p u l a t e d minimum c o n f e r s no a d d i t i o n a l i n f l u e n c e o v e r c o r p o r a t e p o l i c y b e c a u s e o f t h e o n e - m e m b e r o n e - v o t e r u l e . M o r e o v e r , member s' s h a r e s a r e o n l y ' p a i d a l i m i t e d r e t u r n and a r e r e p a i d at p a r on d e p a r t u r e . Even so, t h e r e i s c o n s i d e r a b l e v a r i a t i o n i n t h e a c t u a l c a p i t a l p r o v i d e d by w o r k e r membe r s whi o h c o u l d i n d i c a t e t h e i r f i n a n c i a l c ommi t ment t o t h e c o o p e r a t i v e . One way t o n o r m a l i z e t h e w o r k e r ' s i n d i v i d u a l o w n e r s h i p s t a k e i s wi t h r e s p e c t to t h e t o t a l a s s e t s o f t h e f i r m ( d e n o t e d SHARE) . T h i s v a r i a b l e d i s p l a y s c o n s i d e r a b l e d i s p e r s i o n b o t h b e t w e e n and w i t h i n s e c t o r s and r a n g e s b e t w e e n 10J on a v e r a g e i n e l e o t r i c a l s to 6 2 % i n o o n s u l t a n o y . I t i s a l s o r a t h e r u n s t a b l e o v e r ti me b e o a u s e o f l a r g e c h a n g e s i n t o t a l a s s e t s f r o m y e a r t o y e a r . A c c o r d i n g l y , i t may be a p p r o p r i a t e t o r e g a r d SHARE as a l s o i n d i c a t i n g t h e f i r m ' s o a p l t a l s t r u c t u r e . The b u l k o f w o r k i n g c a p i t a l i n Fr e no h c o o p e r a t i v e s comes f r om " c o l l e c t i v e l y owned r e s e r v e s " f o r me d by a ma n d a t o r y a l l o c a t i o n o f at l e a s t 15t f r om a n n u a l p r o f i t s and l o a n s , p r i m a r i l y f r o m s p e c i a l i s t f i n a n c i a l i n s t i t u t i o n s . H o we v e r , e i t h e r b e c a u s e o f c r e d i t r a t i o n i n g o r b e c a u s e o f an u n w i l l i n g n e s s to become t o o d e p e n d e n t on o u t s i d e f u n d s , c o o p e r a t i v e s a l s o t a k e c o n s i d e r a b l e l o a n s f r om t h e i r own membe r s. A l t h o u g h t h e s e l o a n s r e o e i v e i n t e r e s t and a r e g e n e r a l l y o f s h o r t d u r a t i o n , t h e y n e v e r t h e l e s s r e p r e s e n t a n o t h e r way t h a t w o r k e r s can d e m o n s t r a t e t h e i r commi tment to t he f i r m . The v a r i a b l e LOANS i s

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i n c l u d e d to me a s u r e t h e p r o p o r t i o n o f t o t a l l o a n c a p i t a l l e n t by w o r k e r - m e m b e r s . I t v a r i e s c o n s i d e r a b l y b e t w e e n and w i t h i n s e c t o r s , f r o m a r o u n d 15$ i n t h e m e c h a n i o a l s i n d u s t r y t o i n e x c e s s o f 50$ in t he n e w e r f i r m s o f t h e o o n s u l t a n o y s e o t o r . The v a r i a b l e DET2 i s t he r a t i o o f l o a n s , e x t e r n a l and f r om members, t o e q u i t y i n t h e f i r m, e i t h e r c o l l e c t i v e l y o r i n d i v i d u a l l y owned, and as s uc h r e p r e s e n t s a f a i r l y t r a d i t i o n a l me a s u r e o f f i n a n c i a l s t r u c t u r e . ' ' I n 1 979, i t a v e r a g e s a r o u n d one i n o o n s t r u o t i o n , e l e c t r i c a l s , p r i n t i n g and t he f o o t w e a r and a g r i c u l t u r a l coops . H o w e v e r t h e a v e r a g e i s ar o und two i n t h e t h r e e r e m a i n i n g s e c t o r s , me c h a n i o a l s , s e r v i o e s and c o n s u l t a n c y . A n o t h e r i n d i c a t o r o f c a p i t a l s t r u c t u r e h i g h l i g h t e d by t h e o r y ( s e e Vanek ( 1 9 7 1 ) i s t he p r o p o r t i o n o f t o t a l a s s e t s in c o l l e c t i v e o w n e r s h i p , d e n o t e d RES2. T h i s a l s o v a r i e s c o n s i d e r a b l y , on a v e r a g e , b e t w e e n s e o t o r s r a n g i n g f rom r e l a t i v e l y l o w v a l u e s o f a r o u n d 16$ i n s e r v i c e s and a g r i c u l t u r e to a l e v e l i n e x c e s s o f

3 0

a c c o u n t i n g f o r some 32$, 16.5$ and 9$ o f t h e t o t a l i n o u r s ampl e r e s p e c t i v e l y i n 1979. The r e c o r d s o f t h e c e n t r a l f e d e r a t i o n , C.G.S.C.O.P., to whi ch most PCs i n F r a n c e b e l o n g , o f f e r t h r e e

c a t e g o r i e s f o r t h e f o r m a t i o n p r o c e s s o f F r e n c h c o o ps ; t h e c r e a t i o n o f e n t i r e l y new f i r m s ( N e w ) and f i r m s whi c h h a v e b ee n t r a n s f e r r e d f rom o t h e r l e g a l f o r m s i n t o c o o ps , e i t h e r w i t h o u t any b r e a k ( T r a n s f o r m e d ) o r a f t e r a p e r i o d o f o l o s u r e ( R e v i v e d ) . I n 1 979, t h e m a j o r i t y o f F r e n c h c o o p e r a t i v e s i n e v e r y s e o t o r a r e c r e a t e d f r om s c r a t c h ( Ne w) r a n g i n g f rom a r o u n d 67$ i n me c h a n i c a l s , c o n s t r u c t i o n and e l e c t r i c a l s

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7 to 88Jf i n s e r v i c e s . T r a n s f o r m a t i o n s c o m p r i s e some 10% o f t h e t o t a l i n e v e r y s e o t o r . I I I . The D a t a and t h e R e s u l t s li A. The Da t a The e m p i r i c a l wo r k i s b a s e d on a l a r g e bo d y o f e n t e r p r i s e - l e v e l d a t a , whi c h h a s b ee n d i v i d e d i n t o v a r i o u s d a t a s e t s . PANEL c o n t a i n s a n n u a l d a t a f o r t h e 283 PCs t h a t s u r v i v e d i n F r a n b e t h r o u g h o u t t he p e r i o d 1 970- 1 979. T h i s d a t a s e t e n a b l e s us to m o n i t o r t he e v o l u t i o n o f key v a r i a b l e s i n a p a n e l o v e r t e n y e a r s . No l o n g i t u d i n a l d a t a s e t o f s i m i l a r l e n g t h o r s i z e i s a v a i l a b l e f o r PCs a n y w h e r e . A s e c o nd d a t a s e t , C R OSS - S E C T I ON o o n t a i n s o b s e r v a t i o n s f o r t h e 5*11 PCs t h a t e x i s t e d i n 1 979. T h i s e n a b l e s us to a d o pt a p r o c e d u r e I n v o l v i n g more ag e d i v i s i o n s i n o r d e r to e x a mi ne w h e t h e r and how key v a r i a b l e s o h a n g e as f i r m s age. A t h i r d d a t a s e t , ALL, c o mb i n e s t h e p r e v i o u s t wo d a t a s e t s and a d d s to i t a l l o t h e r a v a i l a b l e i n f o r m a t i o n , e. g. f o r f i r m s a l i v e o nl y d u r i n g some y e a r s d u r i n g 1 9 7 0 - 7 9 . T h i s d a t a s e t ha s s e v e r a l t h o u s a n d o b s e r v a t i o n s f o r most v a r i a b l e s t h o u g h t h e p r e o l s e n u mb e r d i f f e r s f r o m c a s e t o c a s e b e c a u s e o f m i s s i n g v a l u e s . I t a l l o w s us t o e x a mi ne f o r l i f e o y o l e e f f e c t s when a d d i t i o n a l c o n t r o l s a r e i n t r o d u c e d , s uc h as i n d u s t r i a l s e o t o r . B. E m p i r i c a l S t r a t e g y T h e o r i e s o f t h e l i f e o y o l e s u g g e s t many v a r i a b l e s t ha t p o t e n t i a l l y o f I n t e r e s t . W h i l e we w i l l r e v i e w t h e s e t h e o r i e s on, f o r t h e moment we n o t e t h e c e n t r a l v a r i a b l e s o f o o n c e r n d i f f e r e n t s t u d i e s . B r o a d l y s p e a k i n g , t h e s e may be c l a s s i f i e d f o u r g r o u p s . F i r s t a r e m e a s u r e s o f e n t e r p r i s e a r e l a t e r i n t he i n t o At c e n t r e - s t a g e i n t h e economi o t h e o r y o f t he l a b o r managed f i r m ( S e e

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Law and I r e l a n d , 1 9 82) a r e e a r n i n g s p e r w o r k e r . S i n c e t h e c l a s s i c p a p e r by H a r d (1 957) most t h e o r i s t s h a v e p o s t u l a t e d t h a t t he LHF aims to max i mi z e i ncome p e r w o r k e r , t h o u g h r e c e n t l y some h a v e added a d d i t i o n a l a r g u m e n t s to t h e o b j e c t i v e f u n o t l o n , s uch as empl oy ment s t a b i l i t y o r e mp l o y me n t c r e a t i o n . A s e c o nd i m p o r t a n t me a s ur e i s l a b o r p r o d u c t i v i t y me a s u r e d by v a l u e added p e r he ad. Next a r e m e a s u r e s o f w o r k e r p a r t l o l p a t l o n whi c h as E s t r i n , ' ' Jo ne s and S v e j n a r ( 1 9 8 4 ) a r g u e , may be d i v i d e d i n t o me a s u r e s o f w o r k e r p a r t i c i p a t i o n i n d e c i s i o n - m a k i n g and o f w o r k e r ' s f i n a n c i a l a t t a c h me n t t o t he e n t e r p r i s e . Re c e nt mo d e l i n g o f t h e LMF w i t h i n c a p i t a l i s t e c onomi e s ( M i y a z a k i , 1 984; B e n - N e r , 1 984) , l i k e e a r l i e r w r i t i n g s by i n s t i t u t i o n a l i s t s s uch as t h e W e b b s ( 1 9 2 1 ) , ha s c e n t e r e d a t t e n t i o n on m e a s u r e s o f w o r k e r s ' p a r t i c i p a t i o n i n t he e n t r e p r e n e u r i a l g r o u p . Our own p r e v i o u s work ha s s u g g e s t e d t h a t w o r k e r s ' o a p i t a l i n v o l v e m e n t may a l s o be an i m p o r t a n t i n d i c a t o r o f e mp l o y e e i n v o l v e m e n t ( s e e

D e f o u r n e y , E s t r i n and Jones (1 9 8 5 ) ) . B u s i n e s s e c o n o m i s t s s uch as J e ns e n and M e o k l l n g (1 979) as w e l l as t h e o r i s t s in t h e p r o p e r t y r i g h t s t r a d i t i o n ( s e e f o r e x a mp l e F u r u b o t n and P e j o v i c h ( 1 9 7 1 ) o r Vanek i n h i s t h e o r y o f f i n a n o i n g ( Va nek 1971) s t r e s s t h e c r i t i c a l d i me n s i o n o f c a p i t a l s t r u c t u r e , whi oh i s o u r t h i r d c a t e g o r y o f v a r i a b l e . The f i n a l g r o u p i n g o o m p r i s e t h o s e whi c h f e a t u r e i n o e r t a i n t h e o r i e s e s s e n t i a l l y as a u x i l i a r y v a r i a b l e s , s uc h as t h e age s t r u c t u r e o f me mb e r s h i p i n t h o s e t h e o r i e s t h a t e mp h a s i z e c a p i t a l a c c u m u l a t i o n and m e a s u r e s o f s i z e , f o r e x a mp l e , t h e l a b o r f o r c e and t he c a p i t a l - l a b o r r a t i o . To kee p t he s t u d y to a m a n a g e a b l e l e n g t h we c o n c e n t r a t e on a l i m i t e d nu mb e r o f v a r i a b l e s t h a t f a l l w i t h i n t h e s e f o u r g r o u p s . I n

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f a o t , b a s i c I n f o r m a t i o n on t h e t en c hos en me a s u r e ha s b ee n g i v e n in t h e p r e v i o u s s e o t l o n . The m e a s u r e s a r e as f o l l o w s :

PAT a I noome p e r w o r k e r i n c l u d i n g t h e b o n u s f rom p r o f i t s T L A B F s L a b o r f o r c e PAWH e P r o p o r t i o n o f t h e w o r k f o r c e t h a t a r e members L0ANS= P r o p o r t i o n o f l o a n s p r o v i d e d by w o r k e r members SHARE= R a t i o o f a s s e t s owned by i n d i v i d u a l . ' w o r k e r s to t o t a l a s s e t s VARATs C a p i t a l - l a b o r r a t i o V A R A T I s V a l u e a d d e d p e r w o r k e r AVAGLs A v e r a g e a g e o f t h e w o r k f o r c e DET2 s R a t i o o f l o a n s to t o t a l a s s e t s RES2 s R a t i o o f o o l l e o t i v e l y owned a s s e t s to t o t a l a s s e t s

Commenci ng wi t h CROSS SECTI ON wh e r e we h a v e a r e l a t i v e l y l a r g e n u mb e r o f o b s e r v a t i o n s f o r a s i n g l e y e a r , we u s e t h e a g e o f t h e f i r m i n 1 979 t o d i v i d e t h e s a mp l e i n t o t h e maximum nu mb e r o f ag e g r o u p s f o r f i r m s f a l l i n g i n t o no more t h a n f i v e y e a r i n t e r v a l s . I n f a c t , r e f l e c t i n g t h e c o n c e n t r a t i o n o f y o u n g e r f i r m s i n t h e s a mp l e , t h r e e y e a r I n t e r v a l s a r e u s e d f o r f i r m s y o u n g e r t ha n 21 to g e n e r a t e 7 g r o u p s and 5 y e a r i n t e r v a l s u s e d to p r o d u c e 13 g r o u p s f o r o l d e r c f i r m s . F o r each o f t h e t en key v a r i a b l e s we g e n e r a t e g r a p h s w i t h o b s e r v a t i o n s p l o t t e d f o r t h e m i d - p o i n t s o f t h e s i x t e e n a g e - o f - t h e - f i r m I n t e r v a l s . Each p o i n t i s t h e mean f o r f i r m s f a l l i n g w i t h i n t h a t p a r t i c u l a r i n t e r v a l . T h e s e g r a p h s a r e s ho wn in F i g u r e s

1 - 1 0 . To o heck t h e i n f e r e n c e s and q u a n t i f y p a r t i c u l a r p a t t e r n s more p r e c i s e l y , r e g r e s s i o n mo de l s c o r r e s p o n d i n g t o each f i g u r e a r e a l s o e s t i m a t e d , and a r e r e p o r t e d i n T a b l e 1.®

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The PANEL d a t a s e t i s o f c o u r s e s m a l l e r i n any one y e a r b u t has a t e n y e a r l o n g i t u d i n a l d i me n s i o n whi ch g i v e s us two wa y s o f l o o k i n g at t h e l i f e c y o l e p r o o e s s ; f o r g i v e n f i r m s o v e r ti me as w e l l as c r o s s - s e o t i o n a l l y . Wi t h so many v a r i a b l e s u n d e r c o n s i d e r a t i o n t he o h o i o e o f ag e g r o u p i n g s i s s o me wha t a r b i t r a r y , b u t t h e more i n s t i t u t i o n a l l i t e r a t u r e a i d e d by c o n s i d e r a b l e e m p i r i c a l e x p e r i m e n t a t i o n ^ s u g g e s t e d t h a t most l i f e - c y c l e p a t t e r n s co ul d be d i s c e r n e d i n a t r i - p a r t i t e d i v i s i o n - - f i r m s l e s s t han f i v e y e a r s ol d, b e t w e e n 5 and 50 y e a r s ol d and f i r m s o l d e r t ha n 50. Means f o r t he t en v a r i a b l e s o v e r t h e t en y e a r s i n each o f t h e t h r e e a g e g r o u p s a r e r e p o r t e d i n T a b l e 2. To c hec k w h e t h e r t h e s e r e s u l t s a r e s e n s i t i v e to t h e a b s e n c e o f o t h e r c o n t r o l v a r i a b l e s , i n t he r e m a i n i n g e x e r c i s e s we c o n t r o l f o r t h e s e c t o r o f o p e r a t i o n . When we d i s a g g r e g a t e t he PANEL d a t a s e t in t h i s way, we q u i c k l y e n c o u n t e r p r o b l e m s o f i n s u f f i c i e n t d e g r e e s o f f r e e d o m, so t h e t h i r d d a t a s e t , ALL i s u s e d whi ch c o mb i n e s t h e two p r e v i o u s d a t a s e t s and a d d s i n f o r m a t i o n f o r f i r m s whi c h di d not s u r v i v e t h r o u g h o u t t h e 1970' s. U s i n g t h i s d a t a s e t f o r t h o s e key v a r i a b l e s f o r whi oh s u f f i c i e n t d a t a a r e a v a i l a b l e , we comput e t he means f o r f i r m s f a l l i n g w i t h i n t h r e e ag e g r o u p s o r o s s c l a s s i f i e d by ma j o r i n d u s t r i a l s e o t o r . I n T a b l e 3 we r e p o r t t he mean v a l u e s f o r key v a r i a b l e s b e t w e e n a g e g r o u p s w i t h i n ma j o r i n d u s t r i e s .

c . JLsaulta

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l l t e r a t u r e . F i g u r e 1 r e v e a l s t h a t t h e r e i s no s i m p l e l i n e a r

r e l a t i o n s h i p b e t w e e n PAWM, t h e p r o p o r t i o n o f t he w o r k f o r o e who a r e membe r s o f t h e c o o p e r a t i v e , and t h e ag e o f t h e f i r m . R a t h e r we oan d i s o e r n a weak p a r a b o l l o r e l a t i o n s h i p in whl oh PAWM I n i t i a l l y d e c l i n e s u n t i l t h e f i r m r e a c h e s a r o u n d f o r t y y e a r s o f age, and t he n r i s e s . T h i s a s s o c i a t i o n i s c o n f i r m e d i n a s t a t i s t i c a l l y s i g n i f i c a n t r e g r e s s i o n ( p r o b a b i l i t y > F = 0 , 0 1 > ) e x p l a i n i n g PAWM by a q u a d r a t i c in t h e a g e o f t h e f i r m . The minimum can be c a l c u l a t e d as o c c u r r i n g a f t e r ar o und 45 y e a r s .

L i f e - c y o l e p a t t e r n s a r e a l s o c l e a r i n t h e c a s e o f the f o u r c a p i t a l s t r u c t u r e v a r i a b l e s , SHARE, LOANS, DET2 and RES2. Thus F i g u r e 3 p r o v i d e s e m p i r i c a l s u p p o r t f o r t h e p r o p o s i t i o n t h a t t h e p r o p o r t i o n o f a s s e t s o wned i n d i v i d u a l l y by w o r k e r membe r s d e o l i n e s as t h e f i r m a g e s , i n f a c t at a r a t e o f 1.5> p e r y e a r . T h i s i s c o n f i r m e d by r e g r e s s i o n a n a l y s i s i n T a b l e 1, wh e r e t h e s q u a r e o f t h e ag e o f t he f i r m i s i n s i g n i f i o a n t b u t when e x c l u d e d , t h e a g e o f t h e f i r m on i t s own i s n e g a t i v e and s i g n i f i c a n t . The d e o l i n e i n SHARE as t h e c o r p o r a t i o n ma t u r e s i s matched by t h e r i s e i n t he p r o p o r t i o n o f a s s e t s whl oh a r e o o l l e o t l v e l y owned, r e v e a l e d i n F i g u r e 8. T h i s r a t i o i n c r e a s e s f rom an a v e r a g e o f l e s s t h a n 25^ i n t h e y o u n g e s t f i r m s to a r o u n d

50

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e x t e r n a l f i n a n o i n g s t r u o t u r e o f F r e n c h PCs a l s o d i s p l a y s a s i g n i f i c a n t l i f e o y o l e . T h e r e I s a s y s t e m a t i c t e n d e n c y f o r w o r k e r - i e i b e r l o a n s as a p r o p o r t i o n o f t o t a l d e b t to d e o l l n e f rom an l n t l a l l y h i g h l e v e l , a r o u n d 5 0 ) , to t y p i o a l l y l e s s t ha n 2 0 ) In f i r m s t h a t h a v e s u r v i v e d l o n g e r than e i g h t y y e a r s . R e g r e s s i o n a n a l y s i s w i t h LOANS h o w e v e r p i c k s up o n l y a weak l i n e a r r e l a t i o n s h i p - - t h e c o e f f i c i e n t on t h e s q u a r e o f t h e age o f t h e f i r m Id i n s i g n i f i c a n t . F i n a l l y F i g u r e 7 r e v e a l s t h a t t h e s e s t r u c t u r a l c h a n g e s i n the c o m p o s i t i o n o f f i r m s ' a s s e t s go hand i n hand wi t h a p r o n o u n c e d d e c l i n e i n t h e o v e r a l l r a t i o o f d e b t to e q u i t y as t h e PC a g es , f rom b e t w e e n 1.5 and 2.0 i n young f i r m s to l e s s t h a n 0.5 i n ma t ur e coops . I n t he s t a t i s t i c a l l y s i g n i f i c a n t r e g r e s s i o n ( p r o b a b i l i t y > F =

0 . 0 1 ) ) , t h e d e b t - e q u i t y r a t i o i s p r e d i c t e d t o go up a g a i n a f t e r a r o u n d s i x t y y e a r s .

Mo d e l s o f t he LMF ha ve s t r e s s e d t h e r o l e o f a v e r a g e e a r n i n g s p e r head, b o t h as e n t e r p r i s e o b j e c t i v e f u n c t i o n and as t he key s u c o e s s i n d i c a t o r . T h i s i s b e c a u s e , as Ward (1 957) p o i n t e d out, a v e r a g e e a r n i n g s can be c o n c e i v e d as c o m p r i s i n g a notional f i x e d wa g e pa yme nt p l u s d i s t r i b u t e d p r o f i t s p e r w o r k e r . I f t h e p r o p o r t i o n o f p r o f i t d o e s not v a r y e n o r m o u s l y as t h e company ma t u r e s , a v e r a g e e a r n i n g s w i l l t h e r e f o r e r e p r e s e n t p r o f i t a b i l i t y , so l i f e c y c l e p r e d i c t i o n s a b o u t c o r p o r a t e p r o f i t s p o i n t i n t h e same d i r e c t i o n as p r e d i c t i o n s o f coop d e g e n e r a t i o n - - t o t he p r o p o s i t i o n t h a t a f t e r m a t u r i t y i s r e a o h e d , a v e r a g e e a r n i n g s w i l l be a d e c r e a s i n g f u n c t i o n o f t h e ag e o f t h e f i r m. I n f a o t , as oan be s een f r o m F i g u r e 2, PAY d o e s not d i s p l a y any p r o n o u n c e d l i f e c y o l e p a t t e r n . T h i s i s c o n f i r m e d by r e g r e s s i o n a n a l y s i s and r e p o r t e d i n T a b l e 1. The

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- 1 3 -q ua d r a t i o e -q u a t i o n i n t h e ag e o f t h e f i r m i s s t a t i s t i c a l l y i n s i g n i f i c a n t ( p r o b a b i l i t y > F = 8 5 . A ) ) and n e i t h e r t h e a g e o f t he f i r m n o r i t s s q u a r e a r e s i g n i f i c a n t at t h e 10< l e v e l . F i g u r e 5 s u g g e s t s some u p w a r d t r e n d i n l a b o r p r o d u c t i v i t y as t h e f i r m a g e s , t h o u g h t h e v a r i a n o e i s l a r g e . T h i s i s not c o n f i r m e d by t he r e g r e s s i o n a n a l y s i s , wh i c h f a i l s t o I s o l a t e any r e l a t i o n s h i p b e t w e e n VARAT1 and t h e ag e o f t h e f i r m ; b o t h t h e o o e f f i o l d n t s on the q u a d r a t i o i n t h e ag e o f t h e f i r m a r e i n s i g n i f l o a n t at t h e 105t l e v e l . The o r o s s s e o t l o n d a t a t h e r e f o r e s u g g e s t t h a t t h e r e i s no l i f e c y o l e i n e i t h e r o f t h e I n d i c a t o r s o f c o o p e r a t i v e p e r f o r m a n c e . The l a s t c a t e g o r y o f a u x i l i a r y v a r i a b l e s l o o k s at m e a s u r e s s uch as t h e s i z e o f t h e f i r m , t h e c h o i o e o f t e c h n i q u e and t h e a v e r a g e ag e o f t h e w o r k f o r c e . F i g u r e 10 r e v e a l s t h a t o l d e r f i r m s t y p i c a l l y h a v e b i g g e r l a b o r f o r c e s . T h i s f a c t i s c o n f i r m e d i n a s i g n i f i c a n t r e g r e s s i o n ( p r o b a b i l i t y > F = 0.0 1$) whi c h p l o t s o ut an I n v e r s e U - s h a p e t r a j e c t o r y as t h e f i r m a g e s wi t h a maximum b e y o n d t he e x i s t i n g r a n g e o f e x p e r i e n c e , a f t e r a r o u n d 125 y e a r s . F i g u r e A s u g g e s t s t h a t o l d e r f i r m s may a l s o t end t o be s l i g h t l y more o a p i t a l - l n t e n s l v e , a v i e w not s u p p o r t e d by t h e r e g r e s s i o n s whi oh r e v e a l t h a t t h e r e i s no s i g n i f i c a n t l i f e o y o l e i n t h e o h o i o e o f t e c h n i q u e . F i n a l l y f r o m F i g u r e 6 we not e t h a t o l d e r f i r m s on a v e r a g e h a v e o l d e r l a b o r f o r o e s . T h e r e g r e s s i o n c o n f i r m s t h i s r e l a t i o n s h i p ( p r o b a b i l i t y > F = 0 . 0 1 ) ) wi t h t h e e s t i m a t e d I n v e r s e U - s h a p e d c u r v e g e n e r a t i n g a maximum a f t e r a r o u n d 75 y e a r s . The r e s u l t s o f o u r l o n g i t u d i n a l s t u d y a r e r e p o r t e d i n T a b l e 2, whi oh show t h e means o f t h e t en v a r i a b l e s u n d e r c o n s i d e r a t i o n f o r ea ch o f t h e t e n y e a r s i n t h r e e a g e g r o u p i n g s ; a f o r f i r m s l e s s t ha n

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f i v e y e a r s ol d i n 1 970, b f o r f i r m s b e t w e e n 5 and 50 y e a r s ol d i n 1970 and o f o r f i r m s o l d e r t ha n 50 y e a r s i n 1 970. The d a t a s e t c o n t a i n s m i s s i n g v a l u e s , so t h a t when t h e numb e r o f f i r m s i n any c a t e g o r y i s v e r y s m a l l t he mean bec ome s s e n s i t i v e to o u t l i e r s . In t h e s e c a s e s t h e o b s e r v a t i o n i s o mi t t e d . A l l no mi n a l v a r i a b l e s h a v e b e e n d e f l a t e d by t h e GDP d e f l a t o r to a 1970 b a s e . Commenci ng wi t h t h e me a s u r e o f w o r k e r p a r t i c i p a t i o n , PAWM, i t can be s e e n t h a t t he PANEL r e s u l t s a r e c o n s i s t e n t w i t h t h o s e d e r i v e d f o r t h e c r o s s s e o t i o n d a t a s e t , wi t h a U - s h a p e d l i f e c y o l e e f f e c t . Thu s i n e v e r y y e a r o f t h e s a mpl e , t h e p r o p o r t i o n o f w o r k e r s who a r e membe r s i s l o w e r among mi d d l e a g e d f i r m s , ag ed b e t w e e n 5 and 50 in 1970, t han i n e i t h e r v e r y y o u n g o r r e l a t i v e l y mat ur e c o o ps ( g r o u p s a and c) . M o r e o v e r t h o u g h t h e t i me s e r i e s d i m e n s i o n i s n e c e s s a r i l y d i s t o r t e d to some e x t e n t by c y c l i c a l e f f e c t s , we o b s e r v e t h a t among t h e y o u n g f i r m s , PAWM t e n d s to r e ma i n a p p r o x i m a t e l y c o n s t a n t o r d e c l i n e s l i g h t l y o v e r t h e y e a r s , w h i l e t h e t r e n d i s d i s t i n c t l y u p w a r d among t he mi d d l e ag ed and ma t ur e f i r m s , p a r t i c u l a r l y t h e f o r m e r g r o u p . T u r n i n g to o a p i t a l s t r u c t u r e , t he r a t i o o f a s s e t s owned by i n d i v i d u a l w o r k e r s to t o t a l a s s e t s ( SHARE) i s a l w a y s l a r g e r f o r f i r m s i n t h e y o u n g e s t c a t e g o r y c o mpa r e d to f i r m s i n t he o t h e r c a t e g o r i e s . Mo r e o v e r , f o r f i r m s i n t h e y o u n g e s t c a t e g o r y , SHARE f a l l s as f i r m s a g e . But t h e r e i s no s uc h t e n d e n c y a p p a r e n t i n t h e m i d d l e - a g e d f i r m s and t h i s phenomenon i s b a r e l y i n e v i d e n c e w i t h t h e o l d e s t f i r m s . In f i r m s i n t h e y o u n g e s t a g e o a t e g o r y , w o r k e r membe r s as s ume

s i g n i f i o a n t l y more o f t h e f i r m ' s d e b t ( L OAN S) than do t h e i r

c o u n t e r p a r t s in o l d e r e n t e r p r i s e s . As f i r m s i n t h e y o u n g e s t g r o u p

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a g e , v a l u e s f o r LOANS f a l l . Ho we v e r , t h e r e a r e no d e a r t r e n d s f o r o r d i f f e r e n c e s b e t w e e n v a l u e v a r i a b l e s f o r LOANS f o r f i r m s i n t h e two o t h e r c a t e g o r i e s . But w i t h DET2 and RES2 t h e r e a r e p r o n o u n o e d and d e a r p a t t e r n s . Mean v a l u e s f o r DET2 a r e c o n s i s t e n t l y h i g h e s t f o r t h e y o u n g e s t f i r m s , and c o n s i s t e n t l y l o w e s t f o r f i r m s i n the o l d e s t a g e g r o u p . And f o r f i r m s in t h e t wo y o u n g e s t ag e o o h o r t s , DET2 c o n s i s t e n t l y d e o l i n e s as f i r m s ag e. Wi t h RES2 w e ' h a v e an e q u a l l y d r a m a t i o l i f e o y o l e , t h o u g h one o f a v e r y d i f f e r e n t c h a r a c t e r . RES2 i s a l w a y s l a r g e s t ( s m a l l e s t ) i n o l d e s t ( y o u n g e s t ) f i r m s and, i n a l l o a s e s , t h e r a t i o o f o o l l e c t l v e l y owned to t o t a l a s s e t s r i s e s wi t h ti me. When we e x a mi ne i n d i c a t o r s o f p e r f o r m a n c e , not u n e x p e c t e d l y t h e r e i s a s e o u l a r t e n d e n c y f o r r e a l l n o o me s to r i s e o v e r ti me. I n f a o t , t h e r a t e o f g r o w t h i s f a s t e s t among mi d d l e a g e d f i r m s ( 4. 4$ p e r y e a r ) and s l o w e s t among t h e y o u n g e s t f i r m s ( 1. 7$ p e r y e a r ) . F i r m s in g r o u p o h a v e i n t e r m e d i a t e r e a l i n c o me g r o w t h , a v e r a g i n g some 2.6$ p e r annum. H o we v e r , r e a l PAY i s s l i g h t l y h i g h e r on a v e r a g e i n t he y o u n g e s t f i r m s , t h o u g h t h e r e i s not much d i f f e r e n c e b e t w e e n t h e t h r e e g r o u p s , p a r t i c u l a r l y i n t h e l a t e r y e a r s . I n eaoh o f t h e ten y e a r s , l a b o r p r o d u c t i v i t y i s h i g h e r i n t h e o l d e s t t ha n y o u n g e s t age g r o u p i n g , w i t h t h e f i r m s i n o a t e g o r y b h o l d i n g an i n t e r m e d i a t e p o s i t i o n . H o w e v e r l a b o r p r o d u c t i v i t y d i s p l a y s mar ked c y c l i c a l p a t t e r n s , r i s i n g i n a l l g r o u p s u n t i l t he m i d - 1 9 7 0 s and then d i s p l a y i n g a s e o u l a r d o w n w a r d t r e n d . T h i s d e c l i n e wa s most ma r ke d i n t h e h i g h p r o d u c t i v i t y ma t u r e f i r m s and l e s s s i g n i f i c a n t i n t h e l o w e r p r o d u c t i v i t y y o u n g e r o oo ps . Thu s t h e l o n g i t u d i n a l d a t a s e t b r o a d l y c o n f i r m s o u r c r o s s s e c t i o n r e s u l t s on t h e a b s e n c e o f l i f e c y c l e

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e f f e o t s i n t h e v a r i a b l e PAY. H o w e v e r t h e f i n d i n g s o o n o e r n i n g VARATI a r e b r o u g h t i n t o qu e s t l o n — t h e r e woul d a p p e a r to be a weak p o s i t i v e a s s o c i a t i o n b e t w e e n l a b o r p r o d u c t i v i t y and t h e ag e o f t h e f i r m, p a r t i c u l a r l y i n the e a r l y y ear s o f t h e s a mp l e . The r e s u l t s f o r 1979 r e f l e o t t h e f a o t t h a t t h e t r a d e o y o l e s e e ms to ha ve had a

d i f f e r e n t i a l i mpa o t on l a b o r p r o d u c t i v i t y a c c o r d i n g to t he age o f the

f i r m . i ‘

The p l o t u r e on t h e numb e r o f v a l u e s i s a l s o s l i g h t l y d i f f e r e n t i n t h e PANEL c a s e . W h e t h e r one l o o k s at TLABF a c r o s s age c a t e g o r i e s i n each y e a r o r w i t h i n ag e g r o u p s a c r o s s y e a r s , one d i s c e r n s an i n v e r s e - U s h a p e d l i f e c y o l e p a t t e r n . Yo ung f i r m s a r e t y p i c a l l y q u i t e s m a l l b u t g r o w v e r y f a s t , p e r h a p s d o u b l i n g t h e i r l e v e l o f empl oy ment w i t h i n t e n y e a r s d e s p i t e t h e d e p r e s s e d ma r k e t at t h e end o f t he 1 97 0s . M i d d l e ag ed f i r m s a r e much l a r g e r and a l s o t end to g r o w q u i t e f a s t . H o w e v e r f i r m s a g e d o v e r 50 a r e s l i g h t l y s m a l l e r t ha n t h e i r m i d d l e - a g e d c o u n t e r p a r t s i n 1 970 and a o t u a l l y s h r i n k by a b o u t 16> o v e r t h e p e r i o d . Thu s t h e t i me s e r i e s and o r o s s s e c t i o n e l e me n t s o f t h e d a t a t e l l t h e same s t o r y , o f c o o p s whi o h i n i t i a l l y g r o w q u i t e q u l o k l y i n emp l oy ment t e r ms b u t a f t e r a r o u n d 50 y e a r s t end to shed l a b o r a g a i n . H o w e v e r as i n t h e c r o s s - s e c t i o n a l o as e, one oan d i s c e r n no s i m p l e l i f e o y o l e p a t t e r n t o t h e r e a l c a p i t a l - l a b o r r a t i o . T h i s v a r i a b l e d i s p l a y s mar ked e y c l l o a l t e n d e n c i e s o v e r t h e 1 970s, r i s i n g and then f a l l i n g among a l l t h r e e a g e g r o u p s . H o we v e r , t h e f a l l i s more marked among t he o l d e s t - f i r m s , so t h a t by 1 979 t h e d i f f e r e n c e i n o h o i o e o f t e c h n i q u e b e t w e e n r e l a t i v e l y l a b o r - i n t e n s i v e young f i r m s and t he more o a p i t a l - i n t e n s i v e ma t u r e g r o u p v i s i b l e i n 1 970, has v i r t u a l l y d i s a p p e a r e d . Thus w h i l e t h e r e may h a v e b e e n a p o s i t i v e

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- 1 7

-a s s o o l -a t l o n b e t w e e n t h e o -a l t -a l - l -a b o r r -a t i o -and t h e -a g e o f t h e f i r m In t h e e a r l y y e a r s o f t h e s ampl e , t h i s d o e s not hol d t h r o u g h o u t t h e 1 970s . F i n a l l y , t h e r e i s i n f o r m a t i o n f o r t h e a v e r a g e ag e o f w o r k e r s o n l y f o r t h e y e a r 1979. As T a b l e 2 s ho ws , t h i s p r o v i d e s s u p p o r t f o r t h e p r o p o s i t i o n t h a t o l d e r f i r m s t end to h a v e s l i g h t l y o l d e r w o r k e r s . He c o n c l u d e t h i s s e c t i o n wi t h a r e p o r t on l i f e c y c l e s w i t h i n ea ch o f t h e s i x p r i n c i p a l i n d u s t r i a l g r o u p i n g s o f t h e F r e n o h PC s e c t o r , d r a w i n g on t h e f u l l d a t a s et , ALL, to g e n e r a t e s u f f i c i e n t d e g r e e s o f f r e e d o m . Even wi t h t h e a p p r o x i m a t e l y 3, 600 o b s e r v a t i o n s on f i r m s a l i v e i n one o r more o f t h e t en y e a r s c o v e r e d by ALL, the n u mb e r o f o b s e r v a t i o n s on f i r m s i n p a r t i c u l a r ag e g r o u p s i s s t i l l s o me t i me s v e r y s ma l l , and h i g h l y s e n s i t i v e to o u t l y i n g o b s e r v a t i o n s . I n c o n s t r u c t i n g T a b l e 3, we t h e r e f o r e a p p l y t h e r u l e t h a t any g r o u p i n g c o n t a i n i n g f e w e r t ha n t e n o b s e r v a t i o n s i s e x c l u d e d f r o m t he t a b l e . T h i s b r o a d l y c o r r e s p o n d s to r e p o r t i n g o n l y t h e means i n a y e a r f o r whl oh t h e d i f f e r e n c e s a c r o s s at l e a s t one o f t h e ag e g r o u p i n g s a r e s t a t i s t i c a l l y s i g n i f i c a n t at t h e 10f l e v e l . S i n c e t he a v e r a g e a g e o f w o r k e r s by s e o t o r f o r 1 97 9» t h e o n l y y e a r i n wh i c h d a t a i s a v a i l a b l e , ha s b e e n r e p o r t e d e l s e w h e r e ( s e e D e f o u r n e y , E s t r l n and Jo ne s (1 985) , AVAGL i s e x o l u d e d f r om t h e t a b l e . T a b l e 3 t h e r e f o r e r e p o r t s t h e mean v a l u e s o f t h e n i n e v a r i a b l e s u n d e r c o n s i d e r a t i o n i n t h r e e y e a r s - - 1 970, 1975 and 1 9 7 9 - - f o r t h e t h r e e a g e g r o u p i n g s - - a ) y o ung , b ) mi d d l e a g e d and c) ol d f i r m s - - a n d f o r each o f t h e s i x i n d u s t r i a l s e o t o r s . Commenci ng w i t h t h e e v i d e n o e o f w o r k e r p a r t i c i p a t i o n t h e t a b l e o o n f i r m s t h e p r e v i o u s r e s u l t s o f a U - s h a p e d r e l a t i o n s h i p f o r most s e o t o r s i n each y e a r and a c r o s s ti me. H o w e v e r t h e r e a r e mar ked

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d l f f e r e n o e s I n PAHM by s e o t o r as v e i l as ag e g r o u p . Thus the p r o p o r t i o n o f w o r k e r s who a r e member s o f t h e c o o p e r a t i v e I s p a r t i c u l a r l y l o w I n t h e ol d c o n s t r u c t i o n and mi d d l e a g e d e l e o t r l o a l s e c t o r , e s p e c i a l l y i n t h e e a r l y y e a r s o f t h e d e o a d e . I t i s h i g h e r in a l l new f i r m s , b u t p a r t i c u l a r l y I n new m e c h a n i o a l s and s e r v i c e c o o p s . U n l i k e I n c o n s t r u c t i o n , s e r v i o e s e c t o r c o o ps a p p e a r a b l e to ma i n t a i n r e l a t i v e l y h i g h l e v e l s o f me mb e r s h i p as t h e f i r m ma t u r e s to ol d age.

The f i n d i n g s on c a p i t a l s t r u c t u r e a g a i n b r o a d l y c o r r o b o r a t e t he f i n d i n g s f r o m t h e p r e v i o u s t wo t a b l e s . I n n e a r l y a l l s e c t o r s and y e a r s , SHARE t e n d s to d e c l i n e wi t h ag e and o v e r ti me, w h i l e RES1 t e n d s t o i n o r e a s e . The p r o p o r t i o n o f l o a n s d e r i v e d f r o m w o r k e r member s a l s o s h o w s a s m a l l t e n d e n o y to d e c l i n e as t h e f i r m ma t u r e s , t h o u g h c h a n g e s o v e r t i me a r e f r e q u e n t l y p o s i t i v e , p e r h a p s b e o a u s e o f t h e c h a n g i n g c o m p o s i t i o n o f t h e d a t a s e t . F i n a l l y onoe a g a i n we o b s e r v e t h a t t h e d e b t - e q u i t y r a t i o t e n d s t o d i mi n i s h wi t h ag e i n a l l s e c t o r s and t y p i c a l l y o v e r t i me as w e l l , t h o u g h not a l w a y s among the g r o u p o f mi d d l e ag ed f i r m s . The t a b l e a l s o r e v e a l s s i g n i f i c a n t d i f f e r e n c e s i n t he c a p i t a l s t r u c t u r e l i f e o y o l e by i n d u s t r y . F o r e x a mp l e , c o l l e c t i v e r e s e r v e s i n y o u n g s e r v i o e , p r i n t i n g and m e c h a n i o a l s o o o ps a r e t y p i o a l l y r a t h e r l o w, l e s s t ha n 1 2 } o f t o t a l a s s e t s i n 1 979. They a r e a l mo s t t h r e e t i m e s t h a t l e v e l in

e l e o t r l o a l s , and more t ha n 1 9 f i n o o n s t r u o t l o n and c o n s u l t a n c y . T h e r e i s r a t h e r l e s s d i s p e r s i o n i n RES2 i n a g i v e n y e a r f o r mi d d l e a g e d and ma t u r e c o o p e r a t i v e s a c r o s s s e c t o r s . S i m i l a r d i f f e r e n c e s e me r g e i n t h e d e b t - e q u i t y r a t i o , whi oh i s p a r t i c u l a r l y h i g h f o r ne wl y c r e a t e d f i r m s i n t h e s e r v i o e and m e c h a n i o a l s s e c t o r s , b u t much l o w e r i n c o n s t r u c t i o n , e l e c t r i c a l s and p r i n t i n g .

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- 1 9

-Wi t h r e s p e c t to company p e r f o r m a n c e , T a b l e 3 r e v e a l s t h a t once a g a i n t h e r e i s no s i m p l e common p a t t e r n t o t h e r e l a t i o n s h i p b e t w e e n t h e ag e o f t he f i r m and PAY. One can d i s c e r n a weak i n v e r s e U - s h a p e i n a v e r a g e no mi n a l w o r k e r s ’ i no ome a c r o s s a g e g r o u p s , p a r t i c u l a r l y in t h e c o n s t r u c t i o n , p r i n t i n g and s e r v i c e s e c t o r s . Ho we v e r , t h e r e a r e many m i s s i n g v a l u e s i n t h i s s e r i e s so one c a n n o t b u i l d up a f u l l c r o s s s e c t i o n p i o t u r e f o r most s e c t o r s and t h e r e i s a l mo s t no t i me s e r i e s d i m e n s i o n t o t h e r e s u l t s . S i m i l a r p r o b l e m s p r e v e n t us f r om p l o k i n g up s t r o n g l i f e o y o l e e f f e c t s by s e c t o r i n l a b o r p r o d u c t i v i t y b u t as i n o u r p r e v i o u s f i n d i n g s , t h e p a t t e r n i s a m b i g u o u s wi t h p r o d u c t i v i t y i n c r e a s i n g w i t h a g e i n t he c o n s t r u c t i o n and s e r v i o e s e c t o r s i n 1 979 b u t d i s p l a y i n g O - s h a p e d o r I n v e r s e U - s h a p e d p a t t e r n s e l s e w h e r e . I t i s i n t e r e s t i n g to n o t e t h a t PAY i s v e r y h i g h i n t h e new f i r m s o f t h e c o n s u l t a n c y s e o t o r o ompa r e d t o a l l g r o u p s e x c e p t m i d d l e - a g e d p r i n t i n g c o mp a n i e s and mi d d l e a g e d c o n s u l t a n c y c o o ps . A p a r t f r om t h i s , t h e d i s t r i b u t i o n o f I ncome by s e o t o r i s

a p p r o x i m a t e l y t h e same i n each g r o u p . T h e r e i s s o me wha t l e s s

d i s p e r s i o n i n l a b o r p r o d u c t i v i t y i n any y e a r by s e c t o r and a g e g r o u p , b u t t h e r e a r e marked l i f e c y o l e e f f e c t s i n t h e p r i n t i n g and e l e o t r i c a l i n d u s t r i e s , wh e r e a g i n g a p p e a r s to more t ha n d o u b l e p r o d u c t i v i t y . F i n a l l y , t u r n i n g t o s i z e and c a p i t a l - i n t e n s i t y , t he o r o s s - s e o t l o n d i me n s i o n o f T a b l e 3 a g a i n r e v e a l s t h a t o o o ps t y p l o a l l y h a v e l a r g e r l a b o r f o r c e s as t h e y age, p a r t i c u l a r l y i n t he c o n s t r u c t i o n , e l e o t r i o a l and p r i n t i n g s e c t o r s . The p i o t u r e i s l e s s c l e a r o u t o v e r time, b u t t h e u n s t a b l e p a t t e r n s a r e p r o b a b l y d u e to c h a n g e s i n t h e s a mp l e u n d e r c o n s i d e r a t i o n . I t woul d seem t h a t

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o o n s t r u o t l o n c o o p s g r o w v e r y l a r g e , to o v e r 100 w o r k e r s on a v e r a g e w h i l e p r i n t i n g c o o ps s e t t l e at a r o u n d 30 e mp l o y e e s . As b e f o r e , we can d i s o e r n no o b v i o u s p a t t e r n i n any y e a r o r o v e r ti me to t he c a p i t a l - l a b o r r a t i o . Old f i r m s a r e more c a p i t a l - i n t e n s i v e In c o n s t r u c t i o n In 1 979 and w h e r e t h e i n f o r m a t i o n i s a v a i l a b l e , i t s u g g e s t s a t e n d e n c y i n t h a t d i r e c t i o n In me o h a n i o a l s , e l e o t r i o a l s and o o n s u l t a n o y . H o we v e r , t h e r e l a t i o n s h i p i s e i t h e r i n v e r s e - U - s h a p e d o r U - s h a p e d i n t h e r e m a i n i n g s e c t o r s and y e a r s whe r e d a t a a r e a v a i l a b l e . IV. T h e o r i e s and. E v i d e n c e The main p u r p o s e o f t h i s p a p e r i s t h e a s s e m b l y o f s a l i e n t f a c t s to g u i d e f u t u r e t h e o r e t i c a l and e m p i r i o a l work. We do not u n d e r t a k e any r i g o r o u s h y p o t h e s i s t e s t i n g , p r i m a r i l y b e c a u s e t h e l i t e r a t u r e has p r o v i d e d l i t t l e as y e t to be t e s t e d . As we a r g u e e l s e w h e r e , ( E s t r i n and Jones, 1985 b ) muoh o u r r e n t t h e o r e t l o a l work i s o f l i m i t e d r e l e v a n c e to r e a l w o r l d e n t e r p r i s e s . T h i s can be c l e a r l y s een by c o mp a r i n g t he p r e d i c t i o n s o f ma j o r t h e o r i e s wi t h t h e e v i d e n o e f o r

O

F r a n c e , We w i l l do t h i s f i r s t f o r t h e r e c e n t i n f l u e n t i a l mo de l s o f B e n - N e r ( 1 9 8 4 ) and M i y a z a k i ( 1 9 8 4 ) .

Both B e n - N e r and M i y a z a k i a r g u e t h a t t he LMF i s u n s t a b l e and must d e g e n e r a t e i n t o a n o n - o o o p e r a t i v e f o r m, t h o u g h not n e c e s s a r i l y f a i l as an ec onomi c e n t i t y . What i s c r u c i a l i n t h e i r a p p r o a c h i s t h e e x i s t e n c e o f LMF' s i n e n v i r o n m e n t s w h e r e o u t s i d e l a b o u r ma r k e t s e x i s t , wh i c h p r o v i d e s an i n c e n t i v e f o r P C s to e mpl oy n o n - m e m b e r l a b o r . Both p r e d l o t t h a t a f t e r a c e r t a i n p o i n t PAWM w i l l f a l l as t he f i r m a g e s . I f t h e d e g e n e r a t i o n t a k e s t h e f o r m o f g r a d u a l c o n v e r s i o n to t h e c a p i t a l i s t mode o f o r g a n i z a t i o n , t h i s s h o ul d be a s s o c i a t e d

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