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Are Workers. Enterprises Entry Policies Conventional

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  • Michele Moretto

    (University of Padova)

  • Gianpaolo Rossini

    (University of Bologna)

Abstract

One of the main reasons why workers’ enterprises (WE) still represent a relevant chunk of the economy may lie in some affinities with conventional profit maximizing firms. To prove this, we compare the entry policies of WEs and conventional firms when they can decide size at entry while having to stick to it afterwards. Even though short run differences remain, a long run coincidence appears besides that under certainty. Endogenizing size and time of entry in an uncertain dynamic environment we see that WEs enter at the same trigger and size of conventional firms. Both of them wait less and choose a dimension larger than the minimum efficient scale. This may be another way to explain why WE are still an important share of the economy (Hesse and Cihàk, 2007) despite the ongoing mantra of their imminent demise.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2007.31.

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Date of creation: Mar 2007
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Handle: RePEc:fem:femwpa:2007.31

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Keywords: Workers’ Enterprises; Entry; Uncertainty; Rigidity;

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  1. Fehr, Ernst & Sertel, Murat R., 1993. "Two forms of workers' enterprises facing imperfect labor markets," Economics Letters, Elsevier, vol. 41(2), pages 121-127.
  2. Sertel, Murat R., 1991. "Workers' enterprises in imperfect competition," Journal of Comparative Economics, Elsevier, vol. 15(4), pages 698-710, December.
  3. Michele Moretto & Gianpaolo Rossini, . "Start-up entry strategies: Employer vs. Nonemployer firms," Working Papers ubs0409, University of Brescia, Department of Economics.
  4. Roberto Cellini & Luca Lambertini, 2006. "Workers’ enterprises are not perverse: differential oligopoly games with sticky price," Review of Economic Design, Springer, vol. 10(3), pages 233-248, December.
  5. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
  6. Steven R. Grenadier, 2002. "Option Exercise Games: An Application to the Equilibrium Investment Strategies of Firms," Review of Financial Studies, Society for Financial Studies, vol. 15(3), pages 691-721.
  7. Leahy, John V, 1993. "Investment in Competitive Equilibrium: The Optimality of Myopic Behavior," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 1105-33, November.
  8. Pestieau, P. & Thisse, J. -F., 1979. "On market imperfections and labor management," Economics Letters, Elsevier, vol. 3(4), pages 353-356.
  9. Martin Cihák & Heiko Hesse, 2007. "Cooperative Banks and Financial Stability," IMF Working Papers 07/2, International Monetary Fund.
  10. Dixit, Avinash & Pindyck, Robert S & Sodal, Sigbjorn, 1999. "A Markup Interpretation of Optimal Investment Rules," Economic Journal, Royal Economic Society, vol. 109(455), pages 179-89, April.
  11. Craig, Ben & Pencavel, John, 1992. "The Behavior of Worker Cooperatives: The Plywood Companies of the Pacific Northwest," American Economic Review, American Economic Association, vol. 82(5), pages 1083-105, December.
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