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Overview

New ways to study firm dynamics Karen Geurts HIVA – Katholieke Universiteit Leuven COST Expert Meeting HIVA-K.U.Leuven 28-29 April 2011. Overview. Two approaches Identify firm restructurings Data: administrative LEED Method : clustered employee flows

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Overview

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  1. New ways to study firm dynamicsKaren Geurts HIVA – Katholieke Universiteit LeuvenCOST Expert MeetingHIVA-K.U.Leuven 28-29 April 2011

  2. Overview Twoapproaches Identifyfirmrestructurings Data: administrative LEED Method: clustered employee flows Research collaborationwithBelgianSocialSecurity Office (RSZ) Identifyoutsourcingpractices Data: employersurvey Method: questionnaire by business function 2/20

  3. Identify firm restructurings Background Aim: research intofirm & employmentdynamics Data: administrative LEED (99% of Belgian employers) Problem: broken links in longitudinalregistration of firms Result: upward bias in dynamicsmeasures Solution: restorebroken links using ‘employee flowmethod’ Results: ▪ reliable dynamics measures ▪ identify firm restructurings 3/20

  4. Registered reality >< economic reality • Change in firm identifier • firm (with 50 jobs) changes ID nr.01 -> ID nr.02 • 2. Firm restructuring • merger, take-over, split-off,... • firm ID nr.03 (20 jobs) is taken over by firm ID nr.04 (100 jobs) 4/20

  5. Employee flow method Idea • If there is a ‘significant flow’ of employees from firm A to B, establish a link between predecessor A and successor B • In otherwords: “IffirmA at time t-1 and firmB at time t employ (partially) the sameworkforce, thenA and Brelateto (parts of) the samefirm.” • consistencewith Eurostat/OECD definitionsonfirm demography “continuity of one of the main factors of production, i.e. the workforce, is a main criterion for continuity of the firm” 5/20

  6. Employee flow method Pilotversion of method • For eachcouple of quarterst-1 and t: a link between a predecessorA and a successorB is establishedif 1. there is a ‘significant flow’ of at least 10 employees from A to B 2. involving at leastonefirm exit (A)or entry (B)into the population • Result: More accurate measurementfirmdynamics identifyspuriousfirmopenings and closings identify 10 types of firmrestructuring • Currently: refinement of method > what is best thresholdvaluefor minimum size of cluster of employees (absolute, relative) > also flows betweencontinuingfirms > … 6/20

  7. Results Number of firmopenings & closings (Belgium, all sectors exept NACE Rev.2 section O, 2003-2009)  37% to 49% of registeredfirmopenings/closings = notreal 7/20

  8. 10 forms of firm restructuring 8/20

  9. Results Number of employerfirmsinvolved in a “restructuring” (Belgium, all sectors exept NACE Rev.2 section O, 2003-2009) 9/20

  10. Results Sectoralshare of firmsinvolved in a ‘real’ restructuring (excl. ID changes) 10/20

  11. Conclusions Intersectoral relocation of activities • 50% of restructurings take place within same nace5d sector • Other 50% = ‘intersectoral relocation’ of activities Take place mainly between related sectors:  over Nace3d: 38% is intersectoral  over Nace2d: 27% intersectoral  over ‘Sections’: 22% is intersetoral • Intersectoral relocations mainly take place in/out… Trade: into/out various industry & private services sectors Business activities (+ interim): into industry sectors: IT, cleaning,… from public services: various, interim,… 11/20

  12. Outsourcing

  13. Outsourcing Identifyoutsourcing of business activitiesmethodological issues Customized dataset: Employer survey (2008): “Survey on the location and relocation of business functions by Flemish firms” (KEROSINE project) random stratified sample of 1646 employer firms with more than 5 employees, located in the Flemish region of Belgium identical questions on 10 business functions 60,8% average response rate Linkedto LEED from BelgianSocialSecurity Office (2003-2008) 12/20

  14. Outsourcing Questionnaire Inspired by Eurostat International Sourcing Survey Part 1: general identification, background, structure of firm Part 2: 10 business functions for each business function : same list of questions 13/20

  15. Outsourcing 10 generic business functions which determine the functional structure of the firm Core business functions: Main activity, R&D, Logistics & transport, Marketing & sales, Customer services Support business functions: Finan/legal/admin services, HRM, ICT, Facility management, Engineering services Basedonclassificationsby: EU 6FP WORKS ▪ Eurostat International SourcingSurvey ▪ MassLayoffStatisticsProgramme BLS ▪ Global ValueChainInitiative ▪ Quélin & Duhamel (2003) 14/20

  16. Outsourcing List of questions per business function Part 2.1: actual position of bf in firm’s value chain Core or support activity? Carried out by firm’s workforce? If not, where is it carried out (country/company group)? Part 2.2: outsourcing dynamic & strategic definition (Gilley & Rasheed, 2000): “change between internal production and external supply in the last 5 years” 15/20

  17. External supply vs. outsourcing Share of firms which (1) purchase business functions from external suppliers or (2) have outsourced business functions in last 5 years 16/20

  18. International outsourcing Share of firms which (1) purchase business functions from external supplier abroad or (2) have outsourced business functions to other country in last 5 years 17/20

  19. Outsourcing conclusions • Large differences by business function • External supply vs. Outsourcing • Domestic >>> International international: 70% to 90% in FR-NL-DL • Relation with job loss at the firm level • no negative relation between outsourcing and employment growth • 6 business functions: significant positive relation • exception: R&D outsourcing! 18/20

  20. Outsourcing & employment Effect of outsourcing of business functions on firm level employment growth: results of OLS regression Note: heteroscedasticity-robust standard errors in parentheses; * significant at 10%, ** significant at 5%, *** significant at 1% Source: NSSO and KEROSINE outsourcing survey 19/20

  21. Info • Karen Geurts • HIVA – Katholieke Universiteit Leuven • Research InstituteforWork and Society • Parkstraat 47 - bus 5300 • B-3000 Leuven • Tel. +32 16 32 33 78 • karen.geurts@hiva.kuleuven.be • Peter Vets • Statistics department • Belgian National Social Security Office • Victor Hortaplein 11 • B-1060 Brussels • Tel. +32 2 509 31 11 • peter.vets@onssrszlss.fgov.be

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