How Organizational Inefficiency Adversely Affects Number-of-Employee Based Production Outputs

Forrest Jeffrey Yi-Lin (), Kara Orhan (), Augustin Lua A. (), Uzuner Gizem () and Liu Jun ()
Additional contact information
Forrest Jeffrey Yi-Lin: Department of Accounting Economics Finance, Slippery Rock University, Slippery Rock, USA
Kara Orhan: Department of Economics and Finance, West Chester University, West Chester, USA
Augustin Lua A.: Department of Accounting Economics Finance, Slippery Rock University, Slippery Rock, USA
Uzuner Gizem: Department of Industrial Management, School of Management, New Uzbekistan University, Uzbekistan & Department of Economics and Finance, Faculty of Economics Administrative and Social Sciences, Istanbul Gelisim University, Istanbul, Turkey
Liu Jun: School of Digital Economics and Management, Wuxi University, Wuxi, China

Studia Universitatis „Vasile Goldis” Arad – Economics Series, 2024, vol. 34, issue 4, 34-57

Abstract: This study uses an analytical approach to investigate the emerging disconnect between firm size and financial performance, as observed recently from a set of long-term data collected from U.S. public firms. By holding all organizational aspects of a firm constant, it confirms the validity of the old saying that the larger a firm is, the better chance it can secure advantages against rivals and the higher returns it can fetch. However, if the assumption about organizational aspects is removed, the present study shows that if a firm employs its assets to increase production output through hiring additional employees, then the consequently increased organizational inefficiency, as caused by interactions of the employees, will soon erase the expected increase in the output. Additionally, it is also shown, among other results, that when a firm hires additional human labor to meet the increasing market demand, the expected profit will decline after first reaching its maximum level. These results crystalize what has been speculated and what have been empirically observed. In the conclusion section, it is recommended that increasing a firm’s size, in terms of the number of employees, is not a realistic, efficient solution to meeting the challenge of increasing market demand. Instead, any genuine solution must satisfy the condition that it does not increase the organization’s inefficiency of the firm, such as increasing the magnitude of automation and/or digitization.

Keywords: asset size; capital market; firm size; mission; personnel; scale economy; values and beliefs (search for similar items in EconPapers)
JEL-codes: D02 D21 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2478/sues-2024-0017 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:vrs:suvges:v:34:y:2024:i:4:p:34-57:n:1002

DOI: 10.2478/sues-2024-0017

Access Statistics for this article

Studia Universitatis „Vasile Goldis” Arad – Economics Series is currently edited by Florin Cornel Dumiter

More articles in Studia Universitatis „Vasile Goldis” Arad – Economics Series from Sciendo
Bibliographic data for series maintained by Peter Golla ().