Flexible production and entry: institutional, technological, and organizational determinants

Belenzon, Sharon, Bennett, Victor and Patacconi, Andrea (2019) Flexible production and entry: institutional, technological, and organizational determinants. Strategy Science, 4 (3). pp. 193-216. ISSN 2333-2077

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Academics, the media, and policymakers 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 dataset on entry by standalone firms and group affiliates, we provide evidence in support of the model.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Depositing User: LivePure Connector
Date Deposited: 08 Jan 2020 04:21
Last Modified: 22 Oct 2022 05:39
URI: https://ueaeprints.uea.ac.uk/id/eprint/73515
DOI: 10.1287/stsc.2019.0081

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