The Impact of Multiple Work Arrangements on Labor Productivity (Report‪)‬

INTRODUCTION This study investigates the influence of multiple work arrangements (MWA) such as fulltime employees and independent contractors on the labor productivity in long-haul trucking companies. Specifically, we examine whether the levels of soft capacity in production affect the levels and the variances of labor productivity. Balakrishnan and Sivaramakrishnan (2002) define soft capacity as the resources having constraints that can be relaxed with a premium and hard capacity as the resources having constraints that cannot be relaxed in the short run. In this study, the independent contractors are considered as flexible resources (acquired as used and needed). Using the Motor Carrier Financial & Operating Information database, we compare the level and the variance of labor productivity across firms with different levels of soft capacity usage. The findings suggest that the level and the variance of labor productivity are significantly associated with the soft capacity ratio. Ittner and Larcker (1998b) suggest that there are many firm-specific, structural and environmental factors affecting the use and performance consequences of performance measures. These results provide empirical evidence that production capacity based on multiple work arrangements affects labor productivity as a performance measure. We show that the measure of multiple employment arrangements such as the soft capacity ratio associates negatively with the variance of labor productivity and positively with the level of labor productivity. The findings can help owners increase the congruence of the performance measures to management objectives and improve investors' understanding of the information content of labor productivity as a non-financial performance measure in the firm's valuation process.