Flexible production and entry: Institutional, technological, and organizational determinants
Journal Article (Review;Journal)
Academics, the media, and policy makers have all raised concerns about the implications of human workers being replaced by machines or software. Few have discussed the implications of the reverse: firms' ability to replace capital with workers. We show that this flexibility can help new firms overcome uncertainty and increase entrepreneurial entry. We develop a simple real options model where permissive labor regulations allow firms to take advantage of capital-labor substitutability by replacing “rigid” capital with “flexible” labor. The model highlights institutional, technological, and organizational preconditions to using this flexibility. Using a large and comprehensive data set on entry by stand-alone firms and group affiliates, we provide evidence in support of the model.
Full Text
Duke Authors
Cited Authors
- Belenzon, S; Bennett, VM; Patacconi, A
Published Date
- September 1, 2019
Published In
Volume / Issue
- 4 / 3
Start / End Page
- 193 - 216
Electronic International Standard Serial Number (EISSN)
- 2333-2077
International Standard Serial Number (ISSN)
- 2333-2050
Digital Object Identifier (DOI)
- 10.1287/stsc.2019.0081
Citation Source
- Scopus