Jacques Bughin

Strategic direct investment under unionized oligopoly

This paper complements the recent game-theoretic literature on foreign direct investment by modelling the problem of strategic investment in a host economy with (equilibrium) unemployment. Specifically, the possibility of unemployment arises through the presence of unions which can be powerful enough to bargain over wages with the firms producing in the host market. Our major findings are the following. Concerning the labor market, unions are indifferent to the choice by a multinational enterprise (MNE) between exporting or investing abroad, provided that the MNE becomes unionized when opening facilities in the host country; otherwise, unions prefer the MNE to serve only the host market by exports. Concerning the MNE, unionization deters foreign direct investment in the case of full unionization, while unionization is an incentive to foreign direct investment if the MNE is able to be non-unionized in the host country.

The strategic choice of union-oligopoly bargaining agenda

Abstract This article analyzes the optimal choice of union–oligopoly bargaining agenda (i.e., Right-to-Manage versus Efficient Bargaining) under possible market entry. It is shown that agreement by both the union and the incumbent firm about Efficient Bargaining emerges as equilibrium in Nash strategies, even more so under non-blockaded entry for deterrence motives. This is consistent with the common empirical findings that unionized firms do not behave according to the prediction of the Right-to-Manage model that employment will be on the labor demand curve. The entry deterrence effect highlighted in this paper also suggests that labor market organization should not be overlooked as a component of the welfare analysis of product market competition.

Unions and strategic managerial incentives

Abstract This paper shows how strategic managerial incentives weaken union power at Cournot-Nash duopoly equilibrium , although, because of a prisoners dilemma, unions are not averse to those contracts. Thus, one should question whether oligopolists automatically maximize profits when bargaining with trade unions.

To be (unionized) or not to be? A case for cost-raising strategies under Cournot oligopoly

Abstract This paper analyses the decision by firms under Cournot oligopoly as to recognize unions in order to gain market power despite higher costs. Considering classical models of union–firm bargaining, namely right-to-manage (RTM) and efficient bargaining (EB), we show that, for a sufficiently low level of union power EB firms might adopt cost-raising strategies. This theoretical prediction is compatible with some empirical evidence in favour of EB, and adds to the theoretical finding that EB might dominate RTM under unionized Cournot–Nash oligopoly. It also suggests closer antitrust scrutiny as whether unions can provide cartel-like services to oligopoly firms, allowing them to distort product market competition at the expense of consumers.

Capacity Constraints and Export Performance: Theory and Evidence from Belgian Manufacturing

A mark-up model for export and domestic pricing is developed using the dual approach of cost functions and taking explicitly into account the possibility of (short-run) capacity constraints. The model is applied on a panel of Belgian firms to infer product market power on both domestic and export markets, as well as to estimate the effect of export activity on the firm technology and pricing, through the effect of cost flexibility and capacity utilization. Copyright 1996 by Blackwell Publishing Ltd.

Big data, Big bang?

Using a random sample consisting of hundreds of companies worldwide, we are testing the impact on company performance of investing in big data projects targeted on three major business domains (namely, customer interface, company supply chain and competitors). The performance test relies on a so-called trans-logarithmic production function, allowing for a more direct test of the complementarity between big data capital and big data labour investments; further, we have used a Heckman correction to adjust for the fact that companies investing in big data are generally more productive than their peers.We confirm and extend early results of a productivity impact from big data. We find that for the average of our sample, more productive firms are also faster adopters of big data than their industry peers (this explains 2.5% of productivity difference). Big data investments in labour and IT architecture are complements, with a total productivity growth effect of about 5.9%. Big data projects targeting customers and competitive intelligence domains bring slightly more performance than big data projects aimed at supply chain improvements.

Bargaining over employment as a firm strategic choice

This paper develops a simple model as to why unionized Cournot firms acting non-cooperatively in the product market may find it optimal to commit to bargaining outcomes with their specific union, which are off the labor demand curve, hence restricting their behavior to non-profit maximizing practices in their product markets. The prediction that power over labor conceded strategically to the union by the firm is negatively linked to union wage power is not rejected on a panel of Belgian firms as well as the prediction that the union bargaining power can be affected by product market structure and other variables affecting union wages.

Reaping the benefits of big data in telecom

We collect big data use cases for a representative sample of telecom companies worldwide and observe a wide and skewed distribution of big data returns, with a few companies reporting large impact for a long tail of telecom companies with limited returns. Using a joint model of adoption and returns to adoption, we find that the skewness of the distribution arises from a few telecom companies being able to follow key big data managerial and organizational practices. We also find that big data returns exhibit economies of scope, decreasing returns to scale, while big data talents are complementary to big data capex investments.

Oligopoly profit-sharing contracts and the firm's systematic risk1

Abstract This article examines the properties of wage and profit-sharing contracts in a model of oligopoly with capital market equilibrium. While profit-sharing contracts dominate market wage contracts, profit-sharing also reduces the firms cost of equity capital under fairly broad conditions of oligopoly, by enforcing lower costs in exchange for a pre-determined share of cash-flows to workers. This form of operational leverage both reinforces the classical effect of market power on systematic risk and the impact of profit-sharing on the corporate finance of the firm, as previously suggested by Ichino (1994, European Economic Review 38, 1411–1422).

Contractual union-firm agreements and the theory of the firm under uncertainty

Abstract This article analyzes the consequence of introducing union-firm contractual agreements in the theory of the firm under uncertainty. Generalizing the works on the labor-managed firm, it is shown that the risk-averse firm produces more than the risk-neutral firm, or the firm operating under certainty as long as equilibrium employment is negatively related to union wages, that is, when union power over wages is higher than that over employment.