Explaining firms' heterogeneity in productivity and wages : ownership, innovation and size
Micro data have provided invaluable contributions to a better understanding of the drivers of, and factors affecting, wages, productivity and productivity growth. The literature in this area has highlighted both ownership and innovative activity as two factors that consistently seem to affect productivity and its dynamics at the micro level and the empirical regularity that larger firms pay higher wages. This thesis provides evidence on these issues. In the first chapter I investigate the implications of ownership concentration and the presence of financial institutions for productivity, using both accounting data and detailed data on shareholdings for a panel of quoted UK companies. I control for unobserved firm fixed effects and the endogeneity of inputs and ownership using GMM estimation. The second chapter considers whether nationality of ownership affects productivity. The analysis challenges previous evidence of a foreign ownership advantage in the UK by showing that the foreign advantage is by and large a multinational advantage, except for US firms. In addition, longitudinal analysis disentangles the sources of the US and MNE productivity advantage. The third chapter examines the hypothesis that multinational firms have accessto larger knowledges tocks and quantifies how much multinationals' innovative successis due to higher innovation expenditure and how much to access to their intra-firm worldwide pool of information. The fourth chapter matches information on innovative activity with production data to investigate the link between innovation expenditure, knowledge flows and productivity growth. The results confirm the importance of knowledge flows for innovation and of innovation for productivity growth. The final chapter of the thesis investigates the empirical regularity that larger establishments pay higher wages. The longitudinal estimates demonstrate that positive effects of firm size on wages persist after controlling for observed and unobserved worker, firm and match specific characteristics and correcting for non-random mobility of workers.