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Are Worker-Managed Firms Really More Likely to Fail?

  • Burdín, Gabriel

    ()

    (Leeds University Business School)

Different theoretical explanations suggest that worker-managed firms (WMFs) are prone to failure in competitive environments. Using a long panel of Uruguayan firms, the author presents new evidence on firm survival comparing WMFs and conventional firms. Excluding microenterprises and controlling for differences in the effective tax burden faced by the two types of firms, the hazard of dissolution is 29% lower for WMFs than for conventional firms. This result is robust to alternative estimation strategies based on semi-parametric and parametric frailty duration models that impose different distributional assumptions about the shape of the baseline hazard and allow to consider firm-level unobserved heterogeneity. The greater survivability of WMFs seems to associated with the greater employment stability achieved in this type of firms. The evidence suggests that the marginal presence of WMFs in actual market economies can hardly be explained by the fact that these organizations exhibit lower survival chances than conventional firms.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7412.

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Length: 48 pages
Date of creation: May 2013
Date of revision:
Publication status: published in: Industrial and Labor Relations Review, 2014, 67(1), 202-238
Handle: RePEc:iza:izadps:dp7412
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