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Work Flexibility and Firm Growth

Author

Listed:
  • A. Arrighetti
  • L. Cattani
  • F. Landini
  • A. Lasagni

Abstract

In the last decades, work flexibility emerged as a key requirement firms must meet to face volatile markets and highly differentiated product demand. This paper compares two alternative approaches to strengthen work flexibility: internal flexibility, i.e. practices that focus on the employees’ ability to perform a variety of highly qualified tasks in a context of stable employment relationships; and external flexibility, i.e. practices that align employment and labour costs to demand fluctuations using a buffer of non-standard employees involved in routine tasks. We empirically verify whether both practices are able to boost sales growth using a linked employer-employee panel of manufacturing firms from the Emilia-Romagna region (Italy). While internal flexibility positively affects firm growth, external flexibility appears to hamper it. Such a negative effect, however, decreases when we limit the analysis to industries with high demand volatility and cost-based competition. The related managerial and policy implications are discussed.

Suggested Citation

  • A. Arrighetti & L. Cattani & F. Landini & A. Lasagni, 2019. "Work Flexibility and Firm Growth," Economics Department Working Papers 2019-EP04, Department of Economics, Parma University (Italy).
  • Handle: RePEc:par:dipeco:2019-ep04
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    More about this item

    Keywords

    internal flexibility; external flexibility; firm growth; industrial relations;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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