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Douglas L Kruse - One of the best experts on this subject based on the ideXlab platform.
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why do firms adopt Profit Sharing and employee ownership plans
British Journal of Industrial Relations, 1996Co-Authors: Douglas L KruseAbstract:Profit-Sharing and employee ownership in companies have attracted considerable interest, yet there has been little research on factors predicting the adoption and maintenance of these plans. This study uses new data from a survey of 500 US public companies, and panel data on corporate financial variables, to examine factors predicting the presence and adoption of Profit- Sharing and employee stock ownership plans (ESOPs) in the 1975–91 period. Several findings support productivity-related motivations for such plans (including higher R&D levels among old Profit-Sharing firms, and recent adoption of job enrichment programmes among new Profit-Sharing firms), while others support flexibility-related motivations (including higher variance in Profits prior to the adoption of Profit-Sharing plans and ESOPs). Unionized firms were less likely to have either type of plan in 1975, but equally likely to adopt them subsequently (often in concessionary contracts). Comparisons of cross-sectional and panel results illustrate advantages of panel data in disentangling the causes and effects of Profit-Sharing and ESOPs.
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Profit Sharing and Public Policy
Journal of Economic Issues, 1994Co-Authors: Douglas L KruseAbstract:The structure of American workplaces, and the relation of this structure to economic performance, has received increased attention from researchers and policymakers [e.g., Reich 1993; U.S. Department of Labor 1993]. In contrast to the prediction that firms in competitive markets will have a homogeneous set of efficient policies, a number of studies have discovered substantial variation in human resource and compensation policies, with strong links to workplace performance [Ichniowski 1990, 1992; Huselid 1993; Kruse 1993; Blasi et al. 1993; U.S. Department of Labor 1993]. Such findings raise the issue of whether there is a role for public policy in fostering more productive human resource and compensation policies in American workplaces. Employee Profit-Sharing plans have attracted attention as a compensation scheme with significant potential to improve both microeconomic and macroeconomic performance. The microeconomic potential is based on the theory that group incentive plans such as Profit Sharing can result in higher quantity and quality of output by encouraging worker effort, cooperation, and Sharing of ideas and information. The macroeconomic potential is based on the "share economy" theory (developed primarily by Weitzman [1983, 1984, 1985, 1986]) that, by changing employer incentives to hire and retain employees, Profit Sharing leads to lower unemployTnent and greater employment and output stability for firms and
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does Profit Sharing affect productivity
National Bureau of Economic Research, 1993Co-Authors: Douglas L KruseAbstract:Existing research tends to show that Profit-Sharing plans for employees are associated with higher company productivity and Profitability, though the causality and mechanisms are unclear. This study uses new data from a survey of 500 U.S. public companies, and panel data on corporate performance, to examine the relationship between productivity measures and the adoption and presence of Profit Sharing. Controlling for a variety of influences on productivity, Profit Sharing adoption is found to be associated with average productivity increases of 4-5%, with no subsequent positive or negative trend. The productivity increase is dispersed; it is found to be larger for small companies and for cash plans, and to be unaffected when controlling for personnel policies which may affect productivity. There is, however, no evidence on the mechanisms through which Profit Sharing may affect productivity, since there are no strong interactions with information-Sharing or other policies in affecting productivity.
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Profit Sharing: Does It Make a Difference? - Profit Sharing: Does It Make a Difference?
1993Co-Authors: Douglas L KruseAbstract:Kruse details the reasons Profit Sharing plans are implemented and the systemic factors within firms, particularly in relation to unions, that influence whether or not they are successful. He presents evidence based on a unique database developed from 500 public U.S. firms - matched to firm performance over the period of 1979-1991 - on the two central theories related to Profit Sharing: 1) The Productivity Theory, and 2) the Stability Theory.
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Profit Sharing does it make a difference
Books from Upjohn Press, 1993Co-Authors: Douglas L KruseAbstract:Kruse details the reasons Profit Sharing plans are implemented and the systemic factors within firms, particularly in relation to unions, that influence whether or not they are successful. He presents evidence based on a unique database developed from 500 public U.S. firms - matched to firm performance over the period of 1979-1991 - on the two central theories related to Profit Sharing: 1) The Productivity Theory, and 2) the Stability Theory.
Erkki Koskela - One of the best experts on this subject based on the ideXlab platform.
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Can Committed Profit Sharing Lower Flexible Outsourcing
International Economic Journal, 2013Co-Authors: Jan Konig, Erkki KoskelaAbstract:We analyze the impact of committed Profit Sharing for low-skilled workers on the amount of international outsourcing, if there is a bargaining between a firm and a labor union. In this bargaining round, the parties negotiate over the wage and provided effort. Here, we find that effort is independent of the bargaining power, Profit Sharing and wage. We further find that, in general, Profit Sharing leads to a substitution effect, which results in a decreased low-skilled wage and can therefore be an instrument to lower the demanded amount of outsourcing. For the optimal Profit share, we find that it depends on the bargaining power of the union. The firm desists from such a remuneration scheme if the union is too strong. In contrast, if the firm is strong enough, the implementation becomes beneficial.
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Profit Sharing and Outsourcing under Labor Market Imperfection
Review of International Economics, 2012Co-Authors: Jan Konig, Erkki KoskelaAbstract:When the wage rate is set by the labor union, Profit Sharing and outsourcing is combined in this paper to analyze how the implementation of Profit Sharing affects individual effort and wage and thus outsourcing. The findings show that Profit Sharing and wage have an individual effort‐augmenting effect and therefore increase productivity. It is also found that the wage effect of Profit Sharing in general is ambiguous. There is a wage decreasing substitution effect, but in contrast, there is a wage increasing effect via labor demand elasticity and effort so that outsourcing and employment effects are also ambiguous. Furthermore, it is shown under which condition a firm will implement a Profit Sharing scheme.
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Profit Sharing wage formation and flexible outsourcing under labor market imperfection
2010Co-Authors: Erkki Koskela, Jan KonigAbstract:We combine Profit Sharing and outsourcing, if the wage for worker is decided by a labor union to analyze how does the implementation of Profit Sharing affect individual effort and the bargained wage and thus outsourcing? We find that Profit Sharing and the wage level have an individual effort-augmenting effect and therefore increase productivity. We also find that the wage effect of Profit Sharing is ambiguous. There is a wage decreasing substitution effect, but on the other hand, there is a wage increasing effect via labor demand elasticity so that outsourcing and employment effects are also ambiguous.
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Strategic Outsourcing, Profit Sharing and Equilibrium Unemployment
2008Co-Authors: Erkki Koskela, Jan KonigAbstract:We analyze the following questions associated with outsourcing and Profit Sharing under imperfect labour markets. How does strategic outsourcing influence wage formation, Profit Sharing and employee effort when firms commit to optimal Profit Sharing before wage formation or decide for Profit Sharing after wage formation. What is the relationship between outsourcing, Profit Sharing, and equilibrium unemployment depending on whether in other industries Profit share is or is not a part of the compensation scheme. What is the optimal production mode in terms of strategic outsourcing. We find that if firms will decide on Profit Sharing before the wage formation, higher outsourcing decreases wage whereas Profit Sharing has an ambiguous effect. Under flexible Profit Sharing wage is higher if optimal Profit share is small enough. For equilibrium unemployment, we find that if there is no Profit Sharing in other industries, outsourcing will decrease the unemployment rate. But if Profit Sharing is a part of the outside option, then this effect is ambiguous.
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flexible outsourcing Profit Sharing and equilibrium unemployment
2008Co-Authors: Erkki Koskela, Jan KonigAbstract:We analyze the questions associated with flexible outsourcing both with committed and flexible Profit Sharing under imperfect domestic labour markets. How does Profit Sharing influence flexible outsourcing? What is the relationship between outsourcing cost, Profit Sharing and equilibrium unemployment, when Profit Sharing is also a part of the compensation schemes in other industries? In the case of committed Profit Sharing, outsourcing cost increases wage. Optimal flexible Profit Sharing is smaller than in the absence of outsourcing, but outsourcing cost and wage will have ambiguous effect on optimal flexible Profit Sharing. Implementing Profit Sharing can help to avoid outsourcing due to a direct productivity effect and a wage effect. For equilibrium unemployment the effects of outsourcing cost and Profit Sharing are ambiguous both in case of committed and flexible Profit Sharing. In the case of zero effort elasticity there is no committed or flexible Profit Sharing in the absence or presence of outsourcing and in this case lower outsourcing cost will decrease unemployment.
Jan Konig - One of the best experts on this subject based on the ideXlab platform.
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Can Committed Profit Sharing Lower Flexible Outsourcing
International Economic Journal, 2013Co-Authors: Jan Konig, Erkki KoskelaAbstract:We analyze the impact of committed Profit Sharing for low-skilled workers on the amount of international outsourcing, if there is a bargaining between a firm and a labor union. In this bargaining round, the parties negotiate over the wage and provided effort. Here, we find that effort is independent of the bargaining power, Profit Sharing and wage. We further find that, in general, Profit Sharing leads to a substitution effect, which results in a decreased low-skilled wage and can therefore be an instrument to lower the demanded amount of outsourcing. For the optimal Profit share, we find that it depends on the bargaining power of the union. The firm desists from such a remuneration scheme if the union is too strong. In contrast, if the firm is strong enough, the implementation becomes beneficial.
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Profit Sharing and Outsourcing under Labor Market Imperfection
Review of International Economics, 2012Co-Authors: Jan Konig, Erkki KoskelaAbstract:When the wage rate is set by the labor union, Profit Sharing and outsourcing is combined in this paper to analyze how the implementation of Profit Sharing affects individual effort and wage and thus outsourcing. The findings show that Profit Sharing and wage have an individual effort‐augmenting effect and therefore increase productivity. It is also found that the wage effect of Profit Sharing in general is ambiguous. There is a wage decreasing substitution effect, but in contrast, there is a wage increasing effect via labor demand elasticity and effort so that outsourcing and employment effects are also ambiguous. Furthermore, it is shown under which condition a firm will implement a Profit Sharing scheme.
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Profit Sharing wage formation and flexible outsourcing under labor market imperfection
2010Co-Authors: Erkki Koskela, Jan KonigAbstract:We combine Profit Sharing and outsourcing, if the wage for worker is decided by a labor union to analyze how does the implementation of Profit Sharing affect individual effort and the bargained wage and thus outsourcing? We find that Profit Sharing and the wage level have an individual effort-augmenting effect and therefore increase productivity. We also find that the wage effect of Profit Sharing is ambiguous. There is a wage decreasing substitution effect, but on the other hand, there is a wage increasing effect via labor demand elasticity so that outsourcing and employment effects are also ambiguous.
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Strategic Outsourcing, Profit Sharing and Equilibrium Unemployment
2008Co-Authors: Erkki Koskela, Jan KonigAbstract:We analyze the following questions associated with outsourcing and Profit Sharing under imperfect labour markets. How does strategic outsourcing influence wage formation, Profit Sharing and employee effort when firms commit to optimal Profit Sharing before wage formation or decide for Profit Sharing after wage formation. What is the relationship between outsourcing, Profit Sharing, and equilibrium unemployment depending on whether in other industries Profit share is or is not a part of the compensation scheme. What is the optimal production mode in terms of strategic outsourcing. We find that if firms will decide on Profit Sharing before the wage formation, higher outsourcing decreases wage whereas Profit Sharing has an ambiguous effect. Under flexible Profit Sharing wage is higher if optimal Profit share is small enough. For equilibrium unemployment, we find that if there is no Profit Sharing in other industries, outsourcing will decrease the unemployment rate. But if Profit Sharing is a part of the outside option, then this effect is ambiguous.
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flexible outsourcing Profit Sharing and equilibrium unemployment
2008Co-Authors: Erkki Koskela, Jan KonigAbstract:We analyze the questions associated with flexible outsourcing both with committed and flexible Profit Sharing under imperfect domestic labour markets. How does Profit Sharing influence flexible outsourcing? What is the relationship between outsourcing cost, Profit Sharing and equilibrium unemployment, when Profit Sharing is also a part of the compensation schemes in other industries? In the case of committed Profit Sharing, outsourcing cost increases wage. Optimal flexible Profit Sharing is smaller than in the absence of outsourcing, but outsourcing cost and wage will have ambiguous effect on optimal flexible Profit Sharing. Implementing Profit Sharing can help to avoid outsourcing due to a direct productivity effect and a wage effect. For equilibrium unemployment the effects of outsourcing cost and Profit Sharing are ambiguous both in case of committed and flexible Profit Sharing. In the case of zero effort elasticity there is no committed or flexible Profit Sharing in the absence or presence of outsourcing and in this case lower outsourcing cost will decrease unemployment.
Carlo Scarpa - One of the best experts on this subject based on the ideXlab platform.
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Profit Sharing and investment by regulated utilities a welfare analysis
Review of Financial Economics, 2008Co-Authors: Michele Moretto, Paolo M Panteghini, Carlo ScarpaAbstract:We analyse the effects of different regulatory schemes (price cap and Profit Sharing) on the endogenous size of a firm's investment. Using a real option approach in continuous time, we show that Profit Sharing does not delay a firm's start-up investment compared to a pure price-cap scheme. Profit Sharing does not necessarily affect total investment either, if the threshold for Profit Sharing is high enough. Only a Profit Sharing intervening for low Profit levels could delay further investments. We also evaluate the effects of Profit Sharing on social welfare, determining Profit level that should optimally trigger tighter regulation: Profit Sharing should be less stringent in sectors where there is more opportunity for larger investment.
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investment size and firm s value under Profit Sharing regulation
2003Co-Authors: Michele Moretto, Paolo M Panteghini, Carlo ScarpaAbstract:In this article we analyse the effects of different regulatory schemes (price cap and Profit Sharing) on a firm’s investment of endogenous size. Using a real option approach in continuous time, we show that Profit Sharing does not affect a firm’s start-up decision relative to a pure price cap scheme. Unless the threshold after which Profit Sharing intervenes is very high, however, introducing a Profit Sharing element delays further investments: this decreases the present value of total investment. We also evaluate the reduction in the firm’s value due to Profit Sharing, linking this reduction to the option value of future investments.
Michele Moretto - One of the best experts on this subject based on the ideXlab platform.
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Profit Sharing and investment by regulated utilities a welfare analysis
Review of Financial Economics, 2008Co-Authors: Michele Moretto, Paolo M Panteghini, Carlo ScarpaAbstract:We analyse the effects of different regulatory schemes (price cap and Profit Sharing) on the endogenous size of a firm's investment. Using a real option approach in continuous time, we show that Profit Sharing does not delay a firm's start-up investment compared to a pure price-cap scheme. Profit Sharing does not necessarily affect total investment either, if the threshold for Profit Sharing is high enough. Only a Profit Sharing intervening for low Profit levels could delay further investments. We also evaluate the effects of Profit Sharing on social welfare, determining Profit level that should optimally trigger tighter regulation: Profit Sharing should be less stringent in sectors where there is more opportunity for larger investment.
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Opting-out in Profit-Sharing regulation
Industrial Organization, 2004Co-Authors: Michele Moretto, Paola ValbonesiAbstract:To avoid the extremely high Profit levels found in recent experiences with price cap regulation, some regulators have proposed a Profit- Sharing mechanism that revises prices to the benefit of consumers. This paper investigates the conditions under which a regulator can implement such a Profit-Sharing scheme, having the option to revoke the contract if the firm's Profits are excessive. When this option is included in the regulator's objective function and the cost of exercising it is not too high, a long-term equilibrium arises with a state-contingent Sharing rule that guarantees and appropriate level of Profits. The model determines both the level of Profits that triggers the Profit-Sharing mechanism and the consequent price adjustment endogenously. There is an endogenous regulatory lag initially characterized by a price cap regulation, followed by a period of Profit-Sharing regime where the firm is motivated to cut prices to avoid revocation.
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investment size and firm s value under Profit Sharing regulation
2003Co-Authors: Michele Moretto, Paolo M Panteghini, Carlo ScarpaAbstract:In this article we analyse the effects of different regulatory schemes (price cap and Profit Sharing) on a firm’s investment of endogenous size. Using a real option approach in continuous time, we show that Profit Sharing does not affect a firm’s start-up decision relative to a pure price cap scheme. Unless the threshold after which Profit Sharing intervenes is very high, however, introducing a Profit Sharing element delays further investments: this decreases the present value of total investment. We also evaluate the reduction in the firm’s value due to Profit Sharing, linking this reduction to the option value of future investments.
