What Deters Labor-Owned Firm Creation? Evidence from Italian Manufacturing Sectors

Abstract

We analyze the determinants of labor-owned versus capital-owned firm creation. We match firm-level information on a large sample of new manufacturing firms with available industry-level proxies of the main determinants of ownership structures according to existing economics theories. We estimate a logit model and quantify the empirical contribution of each argument to explaining labor-owned versus capital-owned firm entry. Our results show that human capital specificity and workers heterogeneity largely explain labor-owned firm entry, while other dimensions, such as limited worker wealth, have a weaker statistical relevance. These findings are robust to different estimation methods and are unlikely to be affected by endogeneity concerns. Our results contribute to the general understanding of the endogenous dynamics of ownership rights distribution in manufacturing firms and to the elaboration of policy initiatives aimed at supporting cooperative modes of firm organization.

Keywords: Labor-owned firms, theory of the firm, asset specificity, firm entry

JEL Classification: D23, J54, P13