Survival of Labour-owned Firms: a theoretical approach

ARCELUS ULIBARRENA, Francisco J.
; MELGAREJO MOLINA, Zuray
; SIMÓN ELORZ, Katrin

Publication year:

2007

Publication place:

Donostia-San Sebastián

ISSN:

0212-7016

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Summary

This paper presents a theoretical approach of the economic survival of labour-owned firms (LOFs), in contrast to that of the mercantile firms (PCFs), as a result of their distinct capital-ownership configurations. Arguments pro and con abound. Some argue that LOFs enjoy higher probabilities of survival, due to the higher employment stability and higher benefits enjoyed their decision-making labour-owners. The counterarguments centre on the LOFs being more inefficient, due largely to the free-rider problem, presenting serious agency problems, exhibiting higher degree of risk aversion on the part of their labour-owners and being more prone to disappearing into regular PCFs, if successful or going bankrupt, otherwise. The main conclusion of the analysis of this paper is to point out the divergence that exists between the dire predictions of economic theory with respect to the survival prospects of the LOFs and the successful development and operation of LOFs in Spain.