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Do sunk costs nip worker-owned firms in the bud?

Author

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  • Thibault Mirabel

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

In this article the author analyzes the interaction effect of the sunk cost of physical capital and of human capital on the entry of worker-owned firms (WOFs) and conventional firms (CFs). The author estimates a logit model and uses a comprehensive dataset of new French firms in manufacturing sectors with proxies of sunk costs defined at the sector level. The results show that the likelihood of WOF entry is the highest when the sunk cost of human capital is dominant while the sunk cost of physical capital is negligible, as predicted by Kazuhiko Mikami and Satoru Tanaka in their 2010 article. The interaction effect between the types of sunk costs is stronger for worker buyouts than for newly created WOFs. These results are robust to different estimation methods and to endogeneity concerns. These results contribute to the general understanding of the rarity of WOFs in manufacturing sectors and are relevant to policy initiatives supporting cooperative modes of firm organization.

Suggested Citation

  • Thibault Mirabel, 2024. "Do sunk costs nip worker-owned firms in the bud?," Post-Print hal-05429434, HAL.
    • Handle: RePEc:hal:journl:hal-05429434
    DOI: 10.1177/0143831x241284832
    Note: View the original document on HAL open archive server: https://hal.science/hal-05429434v1
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