Reorganization of Firms and Productivity: A Treatment Effects Approach

This paper addresses the question of organization of work and efficient reorganization. An emerging literature is basically concerned with the polar model of high involvement (holistic) vs. traditional (Tayloristic) work organizations. This paper extends in two ways: First, the polar case is augmented by an intermediate layer, referred to as the intertemporal transfer organization. It integrates output market shocks and stresses the adaptability of production, including over time transferability of working hours. Second, on the basis of a survey of manufacturing firms in Germany, the three layer model is investigated empirically. Hypotheses to be tested are: Do the different types indeed exist? Which productivity effects accrue from reorganization? In particular, the complementarity hypothesis of increasing marginal returns of multitasking is studied. A treatment effects approach is used to control for self selection of firms (Maddala (1983)). Empirical findings are that Tayloristic firms still have the greatest portion. Productivity is highest in holistic firms, Tayloristic firms are least productive. Marginal returns from reorganization describe the following ascendinging rank order: Tayloristic firms - intertemporal-transfer-firms - holistic firms. In sum, empirical evidence supports the predictions from theory.