Topic: Labor Dismissal Costs and Process Innovation

Speaker: Jan Bena, Associate Professor, Sauder School of Business, University of British Columbia

Date: November 22nd (Wednesday)

Time: 10:00-11:30am

Location: Building 4, Room 101

Language: English

Abstract:

We show that an arguably exogenous increase in labor dismissal costs leads firms to increase their process innovation but not their product innovation. The effect is stronger in industries where labor is performing more routine intensive tasks and where labor costs account for a larger share of production costs. The increase in process innovation is accompanied by increases in capital expenditures per employee and in capital-labor ratios, as well as by a higher productivity of labor. Our evidence suggests that, by creating adjustment costs that increase operating leverage, labor dismissal costs lead firms to increase innovation efforts toward developing new production technologies that allow for higher capital-labor ratios. 

About the speaker:

Jan Bena’s research agenda has been developing around two areas of financial economics: corporate innovation and corporate ownership structure. In the first area, he studies the determinants of corporate innovation activities and the relation between innovation and other corporate policies and outcomes. This line of research is closely related to the literature in economics that seeks to understand drivers of firm productivity, performance, and valuations, as well as, at a macroeconomic level, underpinnings of economic growth and fluctuations. The second area of Jan’s research agenda lies in the intersection of corporate governance and organizational economics. He focuses on understanding what economic forces drive the formation of corporate ownership structure, and how different ownership structures affect corporate policies and outcomes.