Rovida, Flavio (1995) The effect of unions on investment and innovation decisions theory and empirical evidence. PhD thesis, University of Warwick.

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Abstract

The aim of this thesis is to analyse the effect of unions on investment and
innovation decisions, both at the theoretical and the empirical level.
The theoretical analysis deals with the choice of adoption of a new technology
in the presence of an oligopolistic product market. A duopoly is considered for the ease
of exposition. Unions are assumed to affect innovation decisions only via wage
bargaining. The results show that environments where unions have a relatively strong
(and not very spread) bargaining power tend to harm, ceteris paribus, innovation. If,
instead, there is enough spread between unions in terms of their bargaining power, so
that only one firm innovates, this firm is, ceteris paribus, the one facing the less
powerful union. A firm may be the only one to innovate when facing the more
powerful union, if this union is relatively more concerned with employment than the
"rival". In general, environments where unions prize the defense of employment above
pay rises tend to be more conducive to innovation. These results show the effectiveness
of the "rent-seeking" mechanism outlined by Grout. Finally, there are cases where no
firm would innovate should the labour market be competitive (non-unionised), while
one firm would adopt the new technology, ceteris paribus, when firms face unions.
The main results of the analysis are robust to the consideration of collusion in
the product market. The generalisation to a model in which firms choose the quantity
of capital also confirms the main results.
The empirical analysis is based on data from a sample of British nonagricultural
quoted companies over the period 1982-89. Data on investment have been
constructed from the budget data and matched with information on unionisation and
indutrial relations at the company level. Panel data estimation techniques (mostly
Random Effects) have been employed. The results show that union recognition has,
ceteris paribus, a significantly negative effect on the companies' propensity to invest.
This negative impact is robust to the consideration of product market conditions, but
seems to be concentrated in the first part of the period under study (1982-85). No
separate effect on investment is detected for the presence of closed shop arrangements.
There is evidence that the higher the union density at the company level, the lower the
investment performance, but the results show also some evidence of non-linear effects.
Finally, there is some evidence that companies that have partially derecognised during
the eighties have benefited in terms of investment over the short-run.

Item Type:	Thesis (PhD)
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
Library of Congress Subject Headings (LCSH):	Labor unions -- Great Britain -- Influence, Technological innovations, Wage bargaining, Capital investments -- Great Britain -- History -- 20th century
Official Date:	June 1995
Dates:	Date Event June 1995 Submitted
Institution:	University of Warwick
Theses Department:	Department of Economics
Thesis Type:	PhD
Publication Status:	Unpublished
Supervisor(s)/Advisor:	Naylor, Robin Andrew, 1959-
Extent:	xi, 308 p.
Language:	eng

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