Labour Relations, Flexibility, and Management Intensity in Dutch Firms: An Investigation Using the OSA/SCP Labour Panel Database

Abstract

'High road' Human Resource Management practices (often associated with rigid labour markets) differ from 'low road' practices (flexible labour markets) in terms of employment protection, earnings differentials among employees and amount of direct employees' supervision. Firms employing 'low road' practices tend to rely heavily on supervision, as a consequence of the lack of trust among employees, hence leading to higher management intensity. In earlier research, this phenomenon was observed at country-level. However, the evidence was based on highly aggregated data. The focus of this study is therefore to explore whether the same observation exists at firm level. The 'low road' HRM practice is represented by an external flexibility measure i.e. the intensity of the use of flexible workers. Besides the labour flexibility variable, the influences of various factors associated with firms' internal and external environment are also investigated. The analysis is done using multiple regression analyses on the OSA/SCP database for year 2007-2008. Shares of workers hired from manpower agency are shown to have a small, yet positively significant impact on levels of management intensity in the firm. Firm size, on the other hand, has a significantly negative impact on management intensity. Extent of research and innovation activities in the firm is also found to exert significant influence on management intensity. Firms that are more research intensive and innovative tend to have higher management intensity as compared to non-innovating firms. Lastly, substantial sectoral variations are also observed, which might be explained by firm-level factor such as firm size and level of technical complexity.Economics of InnovationManagement of TechnologyTechnology, Policy and Managemen