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Productivity Effects of Organizational Change: Microeconometric Evidence

Author

Listed:
  • Irene Bertschek

    (ZEW (Centre for European Economic Research) Research Group Information and Communication Technologies, P.O. Box 103443, 68034 Mannheim, Germany)

  • Ulrich Kaiser

    (Department of Business and Economics, University of Southern Denmark at Odense, Campusvej 55, 5230 Odense M, Denmark)

Abstract

This paper analyzes the relationship between investment in information and communication technologies (ICT), non-ICT investment, labor productivity, and workplace reorganization. Firms are assumed to reorganize workplaces if the productivity gains arising from workplace reorganization exceed the associated reorganization costs. Two different types of organizational change are considered: enhancement group work and flattening of hierarchies. Empirical evidence is provided for a sample of 411 firms from the German business-related services sector. We develop and estimate a model for labor productivity and firms' decision to reorganize workplaces that allows workplace reorganization to affect any parameter of the labor productivity equation. Our general and flexible methodology allows us to properly take account of strategic complementarities between the input factors and workplace reorganization. The estimation results show that changes in human resources practices do not significantly affect firms' output elasticities with respect to ICT, non-ICT capital, and labor, although most of the point estimates of the individual output elasticities and of the control variables for observable firm heterogeneity are larger if workplace reorganization is realized. We therefore apply the Kernel density-estimation technique and demonstrate that for firms with organizational change, the entire labor productivity distribution shifts significantly out to the right if workplace reorganization takes place, indicating that workplace reorganization induces an increase in labor productivity that is attributable to complementarities between the various input factors and workplace reorganization. By contrast, firms without organizational change would not have realized significant productivity gains if they had reorganized workplaces.

Suggested Citation

  • Irene Bertschek & Ulrich Kaiser, 2004. "Productivity Effects of Organizational Change: Microeconometric Evidence," Management Science, INFORMS, vol. 50(3), pages 394-404, March.
    • Handle: RePEc:inm:ormnsc:v:50:y:2004:i:3:p:394-404
    DOI: 10.1287/mnsc.1030.0195
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    References listed on IDEAS

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    More about this item

    Keywords

    workplace reorganization; ICT investment; labor productivity; endogenous switching regression model; Kernel density estimation;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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