Van Reenen, John Michael; (1993) Market structure, innovation and union bargaining: An empirical investigation into the creation and capture of economic rents. Doctoral thesis (Ph.D), UCL (University College London).

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Abstract

A panel of firms in the 1970s and 1980s and a cross section of establishments in 1984 is used to investigate the impact of market structure and technological innovation on profit margins, employment and wages. The primary findings are as follows: Profit margins are pro-cyclical across all product groups, they increase with the firm's market share and degree of industrial concentration in the firm's principal operating industry. Innovations are associated with greater profitability for up to six years. This is only partly due to the innovation itself; it is mainly because innovative firms have permanent differences from non-innovators and are better at protecting their profit margins during recessions. Technological change creates jobs at the micro-level and particularly in companies with strong unions. The hypothesis that unions bargain over employment is rejected. Wages tend to increase with innovations in the union sector. The firm panel shows that this 'technological differential' persists into the medium run and is stronger in the late 1970s than the early 1980s. The establishment cross section shows that the result is robust to controls for skill and workplace characteristics and does not seem to be a compensating differential. For all these reasons it is concluded that the wage differential is more likely to arise from bargaining than from purely competitive reasons. The wage mark-up from innovation appears to be greater for skilled workers and declines at higher levels of union power.

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