Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-13T07:13:59.145Z Has data issue: false hasContentIssue false
  • English
  • Français

Institutional complementarities between labour laws and innovation

Published online by Cambridge University Press:  26 June 2018

FILIPPO BELLOC
FILIPPO BELLOC*
Affiliation:
University G. d'Annunzio of Chieti-Pescara, Department of Economic Studies, Viale Pindaro 42, 65127 Pescara
*
*Email: f.belloc@unich.it
Get access Rights & Permissions [Opens in a new window]

Abstract

We analyse how institutional complementarities between employee representation laws and dismissal restrictions influence aggregate innovation outcomes. We argue that greater employee voice, due to improved employee representation legislations, may spur innovative effort by employees only when shareholders cannot renegotiate ex-ante agreements with workers over revenue sharing, by threatening dismissal. We perform a panel regression analysis, exploiting country-sector panel data over the 1977–2005 period, and find that stronger employee representation laws in the presence of stricter firing restrictions are in fact associated with higher patenting activity. Consistently with our theoretical argument, the magnitude of this empirical relationship is seen to be relatively larger in those sectors where the human capital contribution to production is higher. Implications for the analysis of economic institutions and for legal policy making are proposed.

Type
Research Article
Information
Journal of Institutional Economics , Volume 15 , Issue 2 , April 2019 , pp. 235 - 258
Copyright
Copyright © Millennium Economics Ltd 2018 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acharya, V. V., Baghai, R. P. and Subramanian, K. V. (2013), ‘Labor Laws and Innovation’, Journal of Law and Economics, 56 (4): 997–1037.Google Scholar
Acharya, V. V., Baghai, R. P. and Subramanian, K. V. (2014), ‘Wrongful Discharge Laws and Innovation’, Review of Financial Studies, 27 (1): 301–346.Google Scholar
Aghion, P. and Tirole, J. (1994), ‘The Management of Innovation’, Quarterly Journal of Economics, 109 (4): 1185–1209.Google Scholar
Amable, B. (2000), ‘Institutional Complementarity and Diversity of Social Systems of Innovation and Production’, Review of International Political Economy, 7 (4): 645–687.Google Scholar
Aoki, M. (2001), Toward a Comparative Institutional Analysis. Cambridge, MA: MIT Press.Google Scholar
Arellano, M. and Bond, S. R. (1991), ‘Some Specification Tests for Panel Data: Monte Carlo Evidence and an Application to Employment Equations’, Review of Economic Studies, 58 (2): 277–298.Google Scholar
Arulampalam, W. and Booth, A. L. (1998), ‘Training and Labour Market Flexibility: Is There a Trade-off?’ British Journal of Industrial Relations, 36 (4): 521–536.Google Scholar
Autor, D., Kerr, W. and Kugler, A. (2007), ‘Does Employment Protection Reduce Productivity? Evidence from US States’, The Economic Journal, 117 (521): 189–217.Google Scholar
Beck, T., Clarke, G., Gro, A., Keefer, P. and Walsh, P. (2001), ‘New Tools in Comparative Political Economy: The Database of Political Institutions’, World Bank Economic Review, 15 (1): 165–176.Google Scholar
Bird, R. C. and Knopf, J. D. (2009), ‘Do Wrongful-Discharge Laws Impair Firm Performance? Journal of Law and Economics, 52 (2): 197–222.Google Scholar
Botero, J. C., Djankov, S., La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. (2004), ‘The Regulation of Labor’, Quarterly Journal of Economics, 119 (4): 1339–1382.Google Scholar
Bureau, van Dijk (2013) ORBIS Database, Brussels.Google Scholar
Caballero, R. J., Cowan, K. N., Engel, E. and Micco, A. (2013), ‘Effective Labor Regulation and Microeconomic Flexibility’, Journal of Development Economics, 101 (2): 92–104.Google Scholar
Cingano, F., Leonardi, M., Messina, J. and Pica, G. (2016), ‘Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy’, The Economic Journal, 126 (595): 1798–1822.Google Scholar
Ciccone, A. and Papaioannou, E. (2009), ‘Human Capital, the Structure of Production, and Growth’, Review of Economics and Statistics, 91 (1): 66–82.Google Scholar
Costinot, A., Oldenski, L. and Rauch, J. (2011), ‘Adaptation and the Boundary of Multinational Firms’, Review of Economics and Statistics, 93 (1): 298–308.Google Scholar
Deakin, S., Lele, P. and Siems, M. (2007), ‘The Evolution of Labour Law: Calibrating and Comparing Regulatory Regimes’, International Labour Review, 146 (3–4): 133–162.Google Scholar
Fiori, G., Nicoletti, G., Scarpretta, S. and Schiantarelli, F. (2012), ‘Employment Effects of Product and Labour Market Reforms: Are There Synergies?’ The Economic Journal, 122 (558): 79–104.Google Scholar
Fisk, C. (2001), ‘Working Knowledge: Trade Secrets, Restrictive Covenants in Employment, and the Rise of Corporate Intellectual Property’, 1800–1920. Hastings Law Journal, 52 (2): 441–535.Google Scholar
Franceschi, F. and Mariani, V. (2016), ‘Flexible Labour and Innovation in the Italian Industrial Sector’, Industrial and Corporate Change, 25 (4): 633–648.Google Scholar
Garibaldi, P. (1998), ‘Job Flow Dynamics and Firing Restrictions’, European Economic Review, 42 (2): 245–275.Google Scholar
Griffith, R. and Macartney, G. (2014), ‘Employment Protection Legislation, Multinational Firms, and Innovation’, Review of Economics and Statistics, 96 (1): 135–150.Google Scholar
Grossman, S. J. and Hart, O. D. (1986), ‘The Cost and Benefit of Ownership: A Theory of Vertical and Lateral Integration’, Journal of Political Economy, 94 (4): 691–719.Google Scholar
Gurpinar, E. (2016), ‘Institutional Complementarities, Intellectual Property Rights, and Technology in the Knowledge Economy’, Journal of Institutional Economics, 12 (3): 565–578.Google Scholar
Hall, P. and Soskice, D. (2001), ‘An Introduction to Varieties of Capitalism’, in Hall, P. and Soskice, D. (eds), Varieties of Capitalism (pp. 1–68), Cambridge, MA: Harvard University Press.Google Scholar
Hart, O. D. and Moore, J. (1990), ‘Property Rights and the Nature of the Firm’, Journal of Political Economy, 98 (6): 1119–1158.Google Scholar
Holmstrom, B. (1989), ‘Agency Costs and Innovation’, Journal of Economic Behavior and Organization, 12 (3): 305–327.Google Scholar
Ichino, A. and Riphahn, R. T. (2005), ‘The Effect of Employment Protection on Worker Effort: A Comparison of Absenteeism During and After Probation’, Journal of the European Economic Association, 3 (1): 120–143.Google Scholar
Kraft, K., Stank, J. and Dewenter, R. (2011), ‘Co-determination and Innovation’, Cambridge Journal of Economics, 35 (1): 145–172.Google Scholar
Lele, P. P. and Siems, M. M. (2013), ‘Shareholder Protection: A Leximetric Approach’, Journal of Corporate Law Studies, 7 (1): 17–50.Google Scholar
Manso, G. (2011), ‘Motivating Innovation’, Journal of Finance, 66 (5): 1823–1860.Google Scholar
Menezes-Filho, N. A. and Van Reenen, J. (2003), ‘Unions and Innovation: A Survey of the Theory and Empirical Evidence’, in Addison, J. and Schnabel, C. (eds) International Handbook of Trade Unions, Cheltenham (UK): Edward Elgar, pp. 293–335.Google Scholar
Merges, R. P. (1999), ‘The Law and Economics of Employee Invention’, Harvard Journal of Law and Technology, 13 (1): 1–54.Google Scholar
Michie, J. and Sheehan, M. (2003), ‘Labour Market Deregulation, “Flexibility” and Innovation’, Cambridge Journal of Economics, 27 (1): 123–143.Google Scholar
Mortensen, D. and Pissarides, C. A. (1999), ‘Unemployment Responses to “Skill Biased” Shocks: The Role of Labor Market Policy’, The Economic Journal, 109 (455): 242–265.Google Scholar
OECD (2015) Structural Analysis Database (STAN), Paris.Google Scholar
Pagano, U. and Rossi, M. A. (2004), ‘Incomplete Contracts, Intellectual Property and Institutional Complementarities’, European Journal of Law and Economics, 18 (1): 55–76.Google Scholar
Pagano, M. and Volpin, P. F. (2005), ‘The Political Economy of Corporate Governance’, American Economic Review, 95 (4): 1004–1030.Google Scholar
Pieroni, L. and Pompei, F. (2008), ‘Evaluating Innovation and Labour Market Relationships: The Case of Italy’, Cambridge Journal of Economics, 32 (2): 325–347.Google Scholar
Riphahn, R. (2004), ‘Employment Protection and Effort among German Employees’, Economics Letters, 85 (3): 353–357.Google Scholar
Roe, M. J. (2003), Political Determinants of Corporate Governance, New York: Oxford University Press.Google Scholar
Saint-Paul, G. (2002), ‘Employment Protection, International Specialization, and Innovation’, European Economic Review, 46 (2): 375–395.Google Scholar
Samaniego, R. (2006), ‘Employment Protection and High-tech Aversion’, Review of Economic Dynamics, 9 (2): 224–241.Google Scholar
Vatiero, M. (2017), ‘Learning from the Swiss Corporate Governance Exception’, Kyklos, 70 (2): 330–343.Google Scholar
Williamson, O. E. (1985) The Economic Institutions of Capitalism. New York: The Free Press.Google Scholar