Measuring the Effect of Labor-Management Complementarities on Production and Efficiency

Abstract

Existing studies find that labor-management complementarities (LMCs) exist. This paper adds to that literature by quantifying the effect of LMCs on levels of, and differences in, production and efficiency. I find that levels of LMCs are sometimes positively but other times negatively related to levels of production and efficiency. However, differences in LMCs are strictly positively associated with differences in production and efficiency, implying that relatively stronger LMCs are associated with relatively greater production and efficiency. Overall, the results of this study suggest that LMCs are important to firms, particularly when outperforming their competitors.

Keywords: Labor Management Complementarities, Team Production

JEL Classification: J24, L83