DT 06/12 - Does workers’ control affect firm survival? Evidence from Uruguay

Worker-managed firms (WMFs) represent a marginal proportion of total firms andaggregate employment in most countries. The bulk of firms in real economies is ultimatelycontrolled by capital suppliers. Different theoretical explanations suggest that WMFs areprone to failure in competitive environments. Using a panel of Uruguayan firms based onsocial security records and including the entire population of WMFs over the period January 1997-July 2009, I present new evidence on worker managed firms´ survival. I findthat the hazard of exit is 24%-38% lower for WMFs than for conventional firms. This result is robust to alternative estimation strategies based on semi-parametric and parametric frailty duration models that impose different distributional assumptions about the shape of the baseline hazard and allow to consider firm-level unobserved heterogeneity. The evidencesuggests that the marginal presence of WMFs in market economies can hardly be explainedby the fact that these organizations exhibit lower survival chances than conventional firms.This paper adds to the literature on labor-managed firms, shared capitalism and to theindustrial organization literature on firm survival.