Productivity effects of organizational change: Microeconometric evidence

Irene Bertschek, ZEW - Centre for European Economic Research, Mannheim, Germany

This paper analyzes the relationship between investment in informa-tion
and communication technologies (ICT), non–ICT–investment, labor produc-tivity
and workplace reorganization. Firms are assumed to reorganize workplaces
if the productivity gains arising from workplace reorganization exceed the asso-ciated
reorganization costs. Two different types of organizational change are
considered: introduction of group–work and flattening of hierarchies. Empirical
evidence is provided for a sample of 411 firms from the German business–related
services sector.
We develop and estimate a model for labor productivity and firms’ decision to re-organize
workplaces that allows workplace reorganization to affect any parameter
of the labor productivity equation. Our general and flexible methodology allows to properly take account of strategic complementarities between the input
factors and workplace reorganization. The estimation results show that changes
in human resources practises do not significantly affect firms’ output elasticities
with respect to information and communication technologies (ICT), non–ICT–
capital and labor although most of the point estimates of the individual out-put
elasticities and of the control variables for observable firm heterogeneity are
larger if workplace reorganization is realized. We therefore apply Kernel density
estimation technique and demonstrate that for firms with organizational change
the entire labor productivity distribution shifts significantly out to the right if
workplace reorganization takes place, indicating that workplace reorganization
induces an increase in labor productivity that is attributable to complementari-ties
between the various input factors and workplace reorganization. By contrast,
firms without organizational change would not have realized significant produc-tivity
gains if they had reorganized workplaces.

Date: 20 May-00 0000