Introduction

A growing body of econometric evidence suggests that worker participation in firm decision-making increases productivity (Defourney, Estrin and Jones, 1985a, 1985b; Jones and Svejnar, 1985; Estrin, Jones and Svejnar, 1987). Labor-managed firms (LMFs), however, have only a marginal place in Western market economies. LMFs most commonly engage in professional, craft manufacturing, or service activities where capital requirements are modest. The principal exceptions involve worker takeovers of capitalist firms (KMFs) in financial distress (Ben-Ner, 1988a, 1988b).

At first glance, this situation seems paradoxical: why should the bulk of production activity in market economies be organized in hierarchical capitalist firms, when worker control appears to have a significant positive impact on productivity? Writers who have addressed this question can (at some risk of caricature) be classified as skeptics and proponents. Skeptics draw normative conclusions from evolutionary outcomes: if contemporary economies are dominated by capitalist firms, then such firms must have some efficiency advantage relative to more democratic rivals. Authors who have expressed this view include Nozick (1974, Ch. 8), Jensen and Meckling (1979), and Williamson (1985). Skeptics often grant that the LMF might have merit in the specialized niches where it has already proven viable (Hansmann, 1988, 1990a, 1990b), but doubt that widespread adoption of this organizational form would provide net social benefits.

Proponents of the LMF place less weight on the verdict of the market, although they are encouraged by the recent upsurge in the LMF population relative to capitalist firms (Ben-Ner, 1988a). They also take heart from favorable empirical findings about LMF productivity performance.