Knowledge, Skills and Productivity in UK Retailing

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Knowledge, Skills and Productivity in UK Retailing
In collaboration with Bradford, Leeds and London
Metropolitan Universities

• O. Bozkurt, J. Clegg, I. Grugulis, D. Anon Higon,
  S. Salis,
• N. Vasilakos and A. Williams

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Group 1 Case studies

• Intra-Company Knowledge Transfers, Skills, and
  Productivity in UK Supermarkets
• Jeremy Clegg, Irena Grugulis and Odul Bozkurt
• Bradford and Leeds Universities

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Primary Research Questions

• 1-) How do practitioners at various levels in UK
  supermarkets understand and measure
  productivity? How do they conceive of the
  relationship between productivity and
  performance?
• 2-) According to strategists and managers in UK
  supermarkets, what are the most important drivers
  of and impediments to productivity growth in
  their business today?
• 3-) What are the routes of dissemination of
  knowledge inside supermarkets, including that
  from foreign parents?
• 4-) What are the consequences of the efforts to
  improve productivity and performance on the
  organization of work and the knowledge-content
  of jobs in the sector?
• 5-) Does productivity in the sector rely on and
  bring about a low-skills equilibrium, and what
  might be the larger consequences of this for the
  UK economy?

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• In-Depth Case-Study Research in Major UK
  Supermarkets
• Overall Research Progress
• We have secured initial access into three major
  supermarket chains, and conducted initial
  interviews with Head Office representatives.
• Two of these supermarkets are of similar size and
  market share, one of them a foreign-owned
  multinational, the other one a UK-owned
  non-multinational.
• Fieldwork with the first supermarket chain
  started in July 2006. We have been granted
  extensive access for open-ended research here.
  General agreement has been reached with the
  second supermarket chain for similar level of
  access, and final negotiations are underway on
  confidentiality issues.
• The third supermarket chain is much smaller in
  terms of size of operations and market share, but
  offers a unique combination of high-quality
  merchandise and service with high employee
  development, so we are interested in pursuing
  this case further after completion of work with
  the first two supermarkets.
• Contacts have been established in sector forums,
  and multiple interviews have been conducted with
  key informants in the sector employed outside of
  supermarkets.

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Case Study 1

• Research Activities
• Head Office
• 8 out of planned 10-12 interviews at Head Office
  completed These include interviews with high
  level executives in Business Improvement, Wage
  Planning, Recruitment, Training, Customer Service
  and Loss Prevention areas, as well as an
  expatriate expert from the MNE overseas
  headquarters.
• 3 day observation at induction event including
  presentations by company CEO and head of Retail
  Operations, Customer Service and other high level
  company executives.
• Store
• Store 1, an example of a healthy store, has
  been selected after review of store performance
  indicators and in consultation with Head Office
  contact.
• Introductory visit to and tour of Store 1
  completed together with Head Office contact.
• 8 out of 10 planned interviews with managers have
  been completed. We have revised our initial plans
  to now extend the management interviews to 15 out
  of about 20 managers in the average store of the
  chain.
• Access has been obtained from two Department
  Managers for participant observation to be
  carried out with them as an employee now
  scheduled for November-December 2006. These will
  include at least one stint in a department that
  is a production site.
• 20 interviews will be carried out with shopfloor
  workers in Store 1 certain groups (workers with
  long tenure, students, foreign-born etc.) have
  already been targeted and initial participants
  identified. Target date for completion of these
  interviews is Christmas 2006.
• We are looking into the selection of Store 2, an
  example of a difficult store, with different
  performance scores on key indicators. This will
  allow for intra-firm comparison.
• We have started the transcriptions and initial
  review of interviews carried out thus far.

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Group 2 WERS dataset
Summary of our sub-project
Allan Williams Sergio Salis London Metropolitan
University
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Use the WERS 2004 to studythe relationship
between..
1 - Intra-firm knowledge transfers and firm
performance/productivity Cannot be done now,
except for single-establishment (plant) firms
(see point 2). Only 19 single-establishment
firms in retailing (out of 223 identified
retailers), of which only one foreign owned. But
may be possible to study intra-firm knowledge
transfers later if we can link WERS and ARD
(Virtual Lab) in order to identify firms (212
retail establishments agreed to link WERS with
other datasets). 2 - Intra-establishment
knowledge transfers and establishment
performance/productivity Current
focus - We can control for whether establishments
are domestic or foreign owned (47 out of 223
establishments in retailing), and the extent of
the ownership (50, gt 50 or 100). We can
also control for variables reflecting knowledge
transfers from outside the firms (e.g. external
consultancy or professional advice).
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Intra-establishment knowledge transfers and
performance/productivity Methodology

• INDIRECTLY (knowledge transfers cannot be
  directly observed) -By assessing whether some
  specific HR practices are strongly correlated
  with productivity/performance.
• Specific HR practices are those that, in theory,
  facilitate knowledge transfers within the
  establishment, especially knowledge-based
  interactions amongst individuals.
• Focuscorrelation. Causality could be studied
  (checks are needed!) by using the panel component
  of WERS (1998-2004) or merging WERS 2004 and WERS
  1998.
• Initially, focus on subjective measures
  (managers perceptions). Objective measures of
  productivity can be derived from the Financial
  Performance Questionnaire of WERS 2004 (available
  for a sub-sample of establishments in the ONS
  Virtual Lab).

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HR practices enhancing knowledge transfers within
establishments

• Aim to group according to the following criteria
• - HR practices likely to increase the number of
  interactions among individuals (typical
  approach).
• - HR practices favouring bi-directional
  interactions among individuals (e.g. meetings and
  teams, after controlling that no single leader
  monopolises or unilaterally directs these).
• - HR practices increasing the efficiency of
  interactions among individuals (practices
  decreasing the cost/time needed for
  interactions).
• - HR practices allowing for the interactions to
  be effective (stress on practices favouring
  absorption capability, i.e. human capital and
  skills).
• Aim to construct (up to) 4 indicators (one for
  each criterion above if possible) of HR practices
  and regress performance measures against them.

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Group 3 ARD and AFDI Datasets
The Role of MNEs and FDI spillovers in the UK
retail Sector
Dolores Anon Higon and Nicholas V.
Vasilakos Aston University
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MNCs in UK Retailing
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How much better are MNEs?
Source authors calculations using ONS ARD
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RESULTS

• On average, MNEs pay higher average salaries
  however, when we differentiate in terms of origin
  of ownership, just foreign MNEs pay higher.
• These differences might indicate a skill bias
  towards high skilled workers in the labour force
  of foreign MNEs.
• UK_MNEs hire more employees than foreign MNEs
  all MNEs hire more than local non-MNE firms
• when controlling for age size just UKMNEs use
  more PT
• UK_MNEs hire more FT than foreign MNEs all MNEs
  hire more FT than rest of indigenous firms.
• MNEs are more productive than non-MNEs
  independently of the productivity measure.
• UK_MNEs are as productive as US_MNEs in terms of
  LP and TFP
• RoW MNE are not significantly more productive
  than local non_MNE firms, except in terms of LP

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To what extent FDI benefits local UK retailers?
-Restrict sample to domestic firm -We look at
intra-industry regional spillovers -Traditional
Cobb-Douglas production function, correcting for
endogeneity -Levinsohn Petrin, when
dependent varible is log(TFP) -GMM method, when
dependent variable is log(go) --Control for
absorptive capacity using superlative index of
Caves et al for the TFP (Girma Gorg, 2005)
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Empirical Results
Source authors calculations using ONS ARD
merged with AFDI
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Empirical Results
Source authors calculations using ONS ARD
merged with AFDI
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Results

• The results using both approaches, find positive
  regional spillovers from FDI to UK retailers
• The intra-industry results are less clear
• Results show that single plants are the ones who
  benefit form intra-industry spillovers form FDI.
• Retailers benefit more from spillovers as closer
  they are from the technological leader

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Future Plans

• Write draft paper
• Look at outward spillovers, given the importance
  of UK_MNEs in retailing
• Look at the importance of ICT intensity (data on
  investment in software-but not for all firms).
  Split sample according to ICT intensity and see
  if the impact of spillovers differswe have done
  so, but data on software investment is of poor
  quality