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Work Flexibility and Firm Growth

Alessandro Arrighetti (), Luca Cattani (), F. Landini () and Andrea Lasagni ()

No 2019-EP04, Economics Department Working Papers from Department of Economics, Parma University (Italy)

Abstract: In the last decades, work flexibility emerged as a key requirement firms must meet to face volatile markets and highly differentiated product demand. This paper compares two alternative approaches to strengthen work flexibility: internal flexibility, i.e. practices that focus on the employees’ ability to perform a variety of highly qualified tasks in a context of stable employment relationships; and external flexibility, i.e. practices that align employment and labour costs to demand fluctuations using a buffer of non-standard employees involved in routine tasks. We empirically verify whether both practices are able to boost sales growth using a linked employer-employee panel of manufacturing firms from the Emilia-Romagna region (Italy). While internal flexibility positively affects firm growth, external flexibility appears to hamper it. Such a negative effect, however, decreases when we limit the analysis to industries with high demand volatility and cost-based competition. The related managerial and policy implications are discussed.

Keywords: internal flexibility; external flexibility; firm growth; industrial relations (search for similar items in EconPapers)
JEL-codes: D22 J24 J41 L23 M51 M54 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2019
New Economics Papers: this item is included in nep-bec, nep-ent, nep-lma and nep-ore
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