Stakeholder value appropriation: The case of labor in the worldwide mining industry

Date01 May 2018
DOIhttp://doi.org/10.1002/smj.2771
AuthorCristian Ramírez,Jorge Tarziján
Published date01 May 2018
RESEARCH ARTICLE
Stakeholder value appropriation: The case of labor
in the worldwide mining industry
Cristian Ramírez | Jorge Tarziján
School of Management, Pontificia Universidad
Catolica de Chile, Santiago, Chile
Correspondence
Jorge Tarziján, School of Management, Pontificia
Universidad Catolica de Chile, Dirección Vicuña
Mackena 4860, Santiago, Chile.
Email: jtarzija@uc.cl
Funding information
Fondecyt Research Grant, Grant/Award number:
1170654
Research Summary:We evaluate how the value appropri-
ated by employees varies in response to an exogenous
shock to the price of the firms product and how this varia-
tion depends on institutional and ownership structures.
Institutional and ownership structures that favor employees
can influence firmslocation decisions and shareholders
incentives to invest. Using data from the main copper
mines in the world, we show that the value appropriated by
employees rises in response to an exogenous increase in
the price of minerals. Our results indicate that the magni-
tude of the increment in the value captured by employees is
larger in stated-owned companies, when labor regulations
promote productivity-based payments, when wages are
determined through a centralized bargaining process, and
when regulations associated with hiring and firing are more
flexible.
Managerial Summary:We show how labor regulations
and state ownership affect the value appropriated by
employees when there are exogenous changes in the price
of the firms products. Since the value generated by a
firm is distributed among different stakeholders, a higher
appropriation of value by employees results in lower
appropriation by another party. Therefore, by changing
the distribution of value, managerial decisions about loca-
tion and entry could be affected. For instance, share-
holders of firms with positive future expectations about
the prices of their products might prefer to enter markets
in which salary negotiations are not centralized or where
partnership with the local government is not mandatory.
Overall, our analysis calls for the consideration of the
external environment when evaluating value appropria-
tion by different types of stakeholders.
Received: 15 August2016 Revised : 22 September 2017 Accepted: 3 January 2018 Published on: 28 February 2018
DOI: 10.1002/smj.2771
1496 Copyright © 2018 John Wiley & Sons, Ltd. wileyonlinelibrary.com/journal/smj Strat Mgmt J. 2018;39:14961525.
KEYWORDS
bargaining power, employee value appropriation, labor
regulations, mining, ownership type
1|INTRODUCTION
A central question for strategic management scholars is how the value created by firms is appropri-
ated by the different stakeholders (e.g., Lieberman, Garcia-Castro, & Balasubramanian, 2017;
Molloy & Barney, 2015). To account for this process, the literature has developed theoretical
models of value creation and appropriation (e.g., Brandenburger & Stuart, 1996, 2007; Chatain &
Zemsky, 2011; Gans & Ryall, 2016). However, despite conceptual discussions suggesting that the
patterns of value captured by each stakeholder group varies across firms and institutional contexts,
empirical evidence on the determinants of stakeholdersvalue appropriation process remains scarce
(e.g., Asher, Mahoney, & Mahoney, 2005; Lieberman et al., 2017).
The lack of empirical studies on value appropriation also applies to the analysis of how the value
captured by different stakeholder groups differs across national systems (Garcia-Castro & Aguilera,
2015; Lieberman et al., 2017; Vanacker, Collewaert, & Zahra, 2017). Country and institutional char-
acteristics likely impact how the value created is distributed among various stakeholders, since, for
example, stakeholdersbargaining power can be largely determined by external factors (Asher et al.,
2005; Belenzon & Tsolmon, 2016). These potential effects on value appropriation influence impor-
tant managerial decisions, such as resource allocation and entry and location outcomes (Aguilera,
Goyer, & Kabbach-Castro, 2013; Greckhamer, 2016).
We extend the literature on the value appropriation of different stakeholder groups by proposing
an empirical investigation of the effects of exogenous changes in the price of firmsproducts on the
value appropriated by employees, which are a key type of stakeholders (Molloy & Barney, 2015).
Exogenous changes in prices affect the value created by firms (Brandenburger & Stuart, 1996) and,
in turn, the value that can be captured by stakeholders. Our analysis assesses whether the value
appropriated by employees as a response to changes in firmsfinancial resources is moderated by
institutional factors and firmsownership structure. In this way, we study an issue that interests both
scholars and practitioners: the relationship between the stakeholder view of strategy and the dynam-
ics of value appropriation (Amit & Zott, 2001; Garcia-Castro & Aguilera, 2015).
An important set of institutional factors affecting the value appropriated by employees is labor
regulations (DiNardo, Fortin, & Lemieux, 1996; Rodrik, 1999). For instance, countries differ in
terms of the capacity that they give workers to bargain collectively, the easiness of hiring and firing
processes, and the feasibility of having different employment contracts (Botero, Djankov, La Porta,
Lopez-de-Silanes, & Shleifer, 2004), such as the flexibility to adequate payment to productivity
levels (e.g., Cadsby, Song, & Tapon, 2007). Regulations that favor firms over employees may
decrease the amount allocated to the latter group in response to an increase in the value generated
by a firm, whereas the opposite is true for regulations that favor employees over firms.
Firms also differ in terms of their ownership structures: whereas some are privately owned,
others are stated owned, and whereas some show a large dispersion of ownership, others have con-
centrated ownership (Sapienza, 2004). Because of a more diffuse objective function, the
RAMÍREZ AND TARZIJÁN 1497

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