Please contact me at my MIT email (dknelson) for drafts of these papers.
- Job Market Paper: The Dual Nature of Owner-driven Reorganization: Private Equity Buyouts, Upgrading vs. Rechanneling, and Worker Earnings (R&R at the Administrative Science Quarterly).
Amid waves of buyouts, activist investors have battered the separation of ownership and control. How does management by financial markets and firms affect worker mobility? I distinguish resource rechanneling, in which organizations shunt resources toward owners at the expense of workers, from managerial upgrading, in which organizations improve operations in a way that magnifies the earnings of higher-educated workers. I then theorize that investor-controlled organizations will pursue resource rechanneling only when financial markets provide opportunities for returns via financial reorganization. Otherwise, they pursue managerial upgrading. I test this argument by matching federal administrative pay data to all private equity buyouts of U.S. publicly traded companies. This allows the first-ever estimates of the effect of private equity on U.S. workers’ pay. I find that buyouts reliably reduce earnings for non-college workers. For college workers, buyouts reduce pay when debt is cheap (resource rechanneling) and raise pay when debt is expensive (managerial upgrading). Greater opportunities for resource rechanneling lead to buyouts of more labor-intensive companies in slower growth industries that respond to private equity buyouts with greater employment shedding. The findings demonstrate how owner-led strategic reorganization depends on environmental conditions that foster specific value capture and creation mechanisms, shaping outcomes for workers.
- Work Organization and High-paying Jobs, with Nathan Wilmers and LT Zhang (under review at the Administrative Science Quarterly).
High-paying factory jobs in the 1940s were an engine of egalitarian economic growth for a generation. Are there alternate forms of work organization that deliver similar benefits for frontline workers? Work organization varies by types of complexity and their degree of employer control. Technical and tacit knowledge tasks receive higher pay for signaling or developing human capital. Higher autonomy tasks elicit efficiency wages. To test these ideas, we match administrative earnings to task descriptions from job postings. We then compare earnings for workers hired into the same occupation and firm, but under different task allocations. When jobs raise task complexity and autonomy, new hires' starting earnings increase and grow faster. However, while half the earnings boost from complex, technical tasks is due to shifting worker selection, worker selection changes less for tacit knowledge tasks and very little for adding high autonomy tasks. We also study which employers provide these jobs: frontline tacit knowledge tasks are disproportionately in larger, profitable manufacturing and retail firms; technical tasks are in newer health and business services; and higher autonomy jobs are in smaller and fast-growing firms. These results demonstrate how organization-level allocations of tasks can undergird high-paying jobs for frontline workers.
- Earnings Effects of Direct Worker Voice in Production, with Nathan Wilmers (R&R at the Industrial and Labor Relations Review).
Direct worker voice in production could boost productivity and strengthen the bargaining position of production workers. Or it could be a way that employers appropriate workers' knowledge and expertise, thereby weakening workers' position. Using a survey of 30,000 US manufacturing establishments matched to administrative records of worker earnings and business performance, we find that employers using worker voice pay workers more and have higher productivity. Even conditional on workers' human capital and establishment characteristics, workplaces using worker voice pay a small earnings premium. One third of this premium is due to increased productivity; the remaining two thirds of the premium reflects greater worker bargaining power. This analysis provides evidence that worker voice in production supports increased earnings for production workers.
- Racial Inequality and Bureaucracy in US Manufacturing, with Nathan Wilmers (under review at Management Science).
Amid persistent racial inequality, bureaucratic work organization promises fairness: rules and oversight limit racial prejudice. Yet research showing apparent positive effects of bureaucracy for Black workers does not adjust for worker selection. In this project, we compare Black-White earnings inequality in workplaces with two types of bureaucratic organization: structured management practices or unionization. We do so by matching a large survey of US manufacturing establishments to employer-employee linked earnings data. Both types of bureaucratic workplaces pay relatively more to Black workers than do non-bureaucratic workplaces. This holds even within narrow industries and labor markets and among firms of a similar size and productivity level. However, bureaucracy's disproportionate pay advantages for Black workers stem largely from bureaucratic workplaces more positively selecting Black workers. For structured management practice workplaces, this is due mainly to the disproportionately lower ability of exiting Black workers, rather than to differences in hiring. This project shows how apparent inequality effects of employer practices can be driven by worker selection.
- Conform and Oppose through Numbers: Alternative Organizing and Formative Quantification at the International Cooperative Alliance, with B. Huybrechts, T. Nelson, F. Dufays, and N. O’Shea (2nd R&R at the Journal of Management Studies).
Alternative organizations stand in contrast to dominant business values and practices of contemporary capitalism, yet they must simultaneously work within that system. The stress inherent in this position, a dynamic state we name a conform and oppose tension, is particularly salient when a group of alternative organizations join together to advocate their presence and values to gain standing within an environment that they are challenging. Through a study of quantification efforts at the International Cooperative Alliance (2004-2021), the apex organization for the global cooperative movement, we explore the oscillation process that results in the ICA actively and reactively being reshaped over time. Supplementing the prior literature’s focus on quantification as third-party evaluation, we conceptualize formative quantification as a process to negotiate differing value systems. Core to this process is conform and oppose filtering, whereby the quantifier negotiates validity and valorization claims central to its efforts to gain standing and represent the interests and values of the quantified. Our model of formative quantification contributes to contemporary research on alternative organizations and on organizational quantification.
PREPARING FOR SUBMISSION
- Corporate Ownership Change, Relational Contracts, and Employee Belonging, with Victoria Zhang (MIT). Accepted for presentation at the 2023 AOM & 2023 SMS conferences.
- Financial Ownership, Corporate Debt, and Investment in Workers: Testing the Necessity of the
Public Market Mechanism Using Retirement Plan Data. Revising dissertation chapter.
- From the Valley of Death: Ownership and the Realization of Science-to-Commerce Transfer. MA
thesis, integrating with Census data.
I am also developing a series of papers using the confidential Census/IRS data in different ways to advance the organizational theory of ownership, business performance, and worker earnings and job mobility.