John R. Cable

Profit-Sharing and Productivity: Some Further Evidence

New estimates for West Germany indicate overall productivity differentials of 20-30 percent in favor of firms practicing profit sharing. These compare with estimates of 3-8 percent for comparable British firms reported in a recent issue. Like the U.K. results, they reveal important interactions between profit sharing and other firm-specific characteristics, reinforcing the view that profit sharing be regarded as an integral element of overall organizational design. But the fact that in Germany profit sharing is apparently used in a different way than in the United Kingdom by different kinds of firms, suggests that there is no single, uniquely appropriate context and role for profit sharing. Copyright 1990 by Royal Economic Society.

Testing for Persistence of Profits' Differences Across Firms

Abstract We review the logic and implications underlying both static and dynamic models of competition, and associated tests of competitive effectiveness. Complications arising due to innovation, mergers and cyclical factors are discussed. Points raised in the theoretical discussion are illustrated with case histories and estimates for a number of US and UK companies. The empirical analysis tests a larger set of models than has been used in most previous work, and uses longer time series of company profits. We conclude that the patterns of profits observed in both countries are consistent with a larger and more complicated set of models of the competitive process than has been assumed until now, and that further work remains to be done in clarifying both why some firms are persistently profitable, and the nature of the ‘shocks’ that appear to produce structural breaks in the time series of companies’ profits.

The Persistence of Profits in the Long Run: A New Approach

Abstract We present a trend‐based alternative to the standard first‐order autoregression model in persistence of profits studies. This is motivated by reservations over the interpretation of the standard model, and rests on a different concept of dynamic competition. A nine‐category taxonomy of long‐run persistence stereotypes is developed. Structural time series estimates are presented for a sample of UK companies. We find the null of long run competitive equilibrium not rejected in nearly a third of cases, but non‐eroding persistence to be present in around 60%.

Regression vs. non-regression models of normal returns: implications for event studies

Event studies depend critically on correct specification of the counterfactual, normal returns to corporate assets. Model selection tests for a sample of FT-SE 100 UK companies reject two widely used non-regression models against the principal regression-based alternative, the market model.

Robust vs. OLS estimation of the market model: implications for event studies

OLS estimates of the market model reveal pervasive skewness as well as kurtosis, so that robust estimation will not automatically yield efficiency gains. Moreover, under both OLS and robust estimation, normality is restored when abnormal returns are averaged over portfolios of a size used in event studies.

On Modelling the Persistence of Profits in the Long Run: A Test of the Standard Model for 156 US Companies, 1950-99

Abstract ‘Persistence of profits’ studies of competitiveness across samples of firms, and for individual firms, have almost always employed a simple first order autoregression model. Reservations over the use and interpretation of the AR1 in this context raise questions both over the reliability of previous results, and for future research strategy. We test the standard model on a common sample of 156 US companies over a 50 year period against a recently proposed, alternative model that adopts structural time series methods. A statistically significant degree of consistency is found between the two approaches in identifying firms persistently above or below the competitive norm in the long run. However, the structural time series method detects a much higher overall incidence of persistence, and appears to offer advantages in cases where the profit dynamics are more complex.

The relationship between union wage and profitability effects

Abstract This paper presents empirical evidence on the relationship between union effects on wages and on profitability. As expected, unions are found to increase wages (albeit significantly in smaller firms only) and to reduce profitability in a sample of British engineering firms over the period 1979–1982. The key question asked is whether the observed union effect on profitability is no more than a further manifestation of the observed wage effect. Estimates of profit equations normalised to take account of the union wage effect do not reject the hypothesis that it is.

Unions, wages and productivity: some evidence from UK engineering firms

Estimates of union wage and productivity effects are derived using primary micro-level panel data for a sample of firms in the UK engineering industry. Union wage differentials of the order of 10% are suggested from the results, whereas union productivity impacts appear to be non-linear with respect to union density.