The Impact of Firm Size on the Productivity of Resources

Abstract

Purpose

Extending the work of Bayou (2001), we empirically investigate the relationship between firm size and resource productivity to assess whether the productivity of resources (value in use) and their underlying value at sale (value in sale) vary with firm’s size.

Methodology

We use seemingly unrelated regression of revenues and equity values on assets and employees for a large sample over a wide time period and across all industries. We compare companies that are growing, declining, or continuing in size relative to their industry.

Findings

With some variability on growth, we find that smaller companies hold more productive resources based on their capacity to generate more revenues per unit of resources (assets) relative to large companies. Further, as predicted, a firm’s workforce has productive value in use, but limited value after a firm’s sale as measured by equity values.

Practical implications

Collectively, our findings suggest that firm size matters in influencing resource productivity, and a workforce has productive value in use, but low value in sale.

Citation

Clancy, D.K. and Román, F.J. (2014), "The Impact of Firm Size on the Productivity of Resources", Advances in Management Accounting (Advances in Management Accounting, Vol. 22), Emerald Group Publishing Limited, Leeds, pp. 1-24. https://doi.org/10.1108/S1474-7871(2013)0000022006