Maria Guadalupe

Innovation and Foreign Ownership

This paper uses a rich panel dataset of Spanish manufacturing firms (1990-2006) and a propensity score reweighting estimator to show that multinational firms acquire the most productive domestic firms, which, on acquisition, conduct more product and process innovation (simultaneously adopting new machines and organizational practices) and adopt foreign technologies, leading to higher productivity. We propose a model of endogenous selection and innovation in heterogeneous firms that jointly explains the observed selection process and the innovation decisions. Further, we show in the data that innovation on acquisition is associated with the increased market scale provided by the parent firm.

Globalization and the Provision of Incentives Inside the Firm: The Effect of Foreign Competition

This article studies the effect of changes in foreign competition on the structure of compensation and incentives of U.S. executives. We find that import penetration (instrumented with exchange rates and tariffs) leads to more incentive provision in a variety of ways. First, it increases the sensitivity of pay to performance. Second, it increases within‐firm pay differentials between executive levels, with CEOs typically experiencing the largest wage increases. Finally, higher foreign competition is also associated with a higher demand for talent. These results suggest that increased foreign competition can explain some of the recent trends in compensation structures.

The Hidden Costs of Fixed Term Contracts: the Impact On Work Accidents

Abstract This paper assesses whether or not there is a systematic difference between the accident rates of fixed-term and permanent contract workers that is not just the result of a compositional effect. A pure contractual effect leading to a higher accident rate might exist because the short duration of the temporary contract reduces the incentives to invest in specific human capital or because effort is higher to increase rehiring probabilities. I provide two identification strategies to control for selection and reporting biases. The results confirm there is a pure contractual effect that increases the accident probability by 5 percentage points.

Product Market Competition, Returns to Skill, and Wage Inequality

This article examines the effect of product market competition on firms’ willingness to pay for workers of different skills. Using a panel of UK workers and two different quasi‐natural experiments, I show that returns to skill within an industry increase with competition. I also investigate the mechanisms behind this relationship: in addition to the indirect effects that operate through union bargaining and skill‐biased technical change, there is evidence for a direct effect of competition beyond those channels. I provide an explanation for this finding based on the relationship between competition and the sensitivity of profits to cost reductions.

The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization

This paper establishes a causal effect of competition from trade liberalization on various characteristics of organizational design. We exploit a unique panel dataset on firm hierarchies (1986-1999) of large U.S. firms and find that increasing competition leads firms to become flatter, i.e., (i) reduce the number of positions between the CEO and division managers (DM), (ii) increase the number of positions reporting directly to the CEO (span of control), (iii) increase DM total and performance-based pay. The results are generally consistent with the explanation that firms redesign their organizations through a set of complementary choices in response to changes in their environment.