Performance and Growth in Entrepreneurial Firms: What do Unions do?
Welbourne, Theresa M.; Batt, Rosemary
This paper explores the effects of union presence on the performance of entrepreneurial firms in the mid-1990s (both at the initial public offering (IPO) and after the event). Contrary to prior studies, we find that within our sample, union presence raises Tobin’s q by 14.5 percent. For the critical outcomes of earnings growth and growth in share price, union presence raises earnings over three years by 10.1 percent and raises stock price by 15.7 percent. We interpret these findings using the exit/voice framework. We suspect that union bargaining power in the highly competitive environment of entrepreneurial firms is limited, and therefore, the union effects on compensation are also likely to be limited. In addition, we suspect that unions provide a mechanism for employee voice that constrains managerial prerogative in ways that reduce short-term decision-making and support longer term investment in human capital and the adoption of higher performing production systems.
research; union; industrial; earnings; employee; performance; earnings; investment