The next Economics Seminar of Paris-Saclay will take place on Thursday, October 27 from 12h15 to 13h15. Eric Mengus (HEC) will present Within-firm services and firm capabilities (with Tomasz Michalski).
We document that more than one third of employment and two-fifths of the wage bill in French manufacturing firms is in jobs performing service functions—i.e., neither production nor management— and that these functions gained importance over the period 1999-2015. We underline the role of the non-routine functions that are more prevalent in larger firms. Conditioning on firm size, their higher shares in employment are correlated with innovation, intangible capital, product complexity, higher total factor productivity and profitability. This suggests that firms use non-routine services to gen- erate within-firm knowledge and create firm capabilities. Consistently with empirical regularities, we model firms as organizations where production of higher-value added, complex goods requires within-firm knowledge workers to develop capabilities.