Owners and employees wages: a question of rent appropriability

Abstract

Purpose: The purpose of this paper is to studuy how the owner identity affects the investment in human capital, measured by wage intensity, as well as the moderating effect of firm’s performance. Design/methodology/approach: A balanced panel of 1,266 Spanish firms that respond to the Survey of Business Strategies for a five-years period was used, which represents a total of 6,330 observations. The dynamic models are estimated using the general method of moments. Findings: The state ownership has a positive and significant effect on specific wage intensity. However, when ownership is in private hands: foreign shareholders, other companies-, the effect is significant but negative. In firms with state ownership, greater economic performance has a negative influence on human capital investment. The results also reveal that while privately owned firms – those with foreign shareholders – tend to invest less in human capital, that tendency diminishes when the firm obtains higher economic performance. Practical implications: Different owners may have different objectives and decision-making horizons, which affect the firm’s investment on human capital. The results obtained regarding the owner identity-wage intensity relationship may serve as a reference for the non-listed firms of continental Europe. The influence of ownership structure on the firm’s decision to invest in human capital is conditioned by the firm’s economic performance. Originality/value: The paper reveals the importance of considering each of the firm’s owners, since their influence on wage intensity differs according to the identity of the owner. There are little empirical papers which analyze the impact of ownership structure on wage intensity, depending on the identity of firm’s owners in a civil context. Moreover, a dynamic panel model is needed due to the firm’s wage intensity does not adjust immediately as their wages are often referring to the previous year rather than being fully negotiated. This paper can be considered a step forward in understanding owner identity characteristics in Spanish-European context.