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Factory Productivity and the Concession System of Incorporation in Late Imperial Russia, 1894-1908

Journal: American Economic Review

Date: 20200201

Author: Gregg, Amanda G.

Abstract:
In Imperial Russia, incorporation required an expensive special concession, yet over 4,000 Russian firms incorporated before 1914. I identify the characteristics of incorporating firms and measure the productivity gains and growth in machine power enjoyed by corporations using newly-constructed factory-level panel data compiled from Russian factory censuses. Factories owned by corporations were larger, more productive, and more mechanized than unincorporated factories. Higher productivity factories were more likely to incorporate and, after incorporating, added machine power and became even more labor productive. Russian firms sought the corporate form's full set of advantages, not just stock markets access, to obtain scarce long-term financing.

Link: Google Scholar

Key Findings

Higher Productivity & Capital Intensity

Corporation-owned factories were significantly more productive and capital-intensive than non-corporate factories, with 13x higher average revenue and 12x more workers

Selection into Incorporation

More productive firms self-selected into incorporation, with factories that became corporations already having 47% higher revenue per worker before incorporating

Benefits of Corporate Form

After incorporating, factories added significant machine power and became even more labor productive, though total factor productivity remained neutral

Corporate vs Non-Corporate Factory Performance

  • Corporate factories had average revenue of 1.36M rubles vs 102K for non-corporate
  • Corporate factories employed 712 workers on average vs 59 for non-corporate
  • Corporate factories had 578 HP of machine power vs 33 HP for non-corporate

Industry-wise Corporate Presence

  • Capital-intensive industries had highest corporate presence (Cotton 23.4%, Chemicals 22.5%)
  • Metals/Machines and Flax industries showed moderate corporate presence (11-13%)
  • Labor-intensive industries like Wood had lowest corporate presence (3.7%)

Productivity Changes After Incorporation

  • Revenue per worker increased by 20% after incorporation
  • Machine power per worker increased by 30% after incorporation
  • Total Factor Productivity showed minimal change (5%)

Contribution and Implications

  • First comprehensive factory-level analysis of incorporation's effects in a developing economy context
  • Demonstrates that incorporation's benefits extended beyond stock market access to include broader capital advantages
  • Suggests that the concession system's barriers to incorporation may have constrained Russian industrial growth

Data Sources

  • Corporate vs Non-Corporate Performance chart based on Table 3, Panel A descriptive statistics
  • Industry-wise Corporate Presence chart based on Table 2 data for 1908
  • Productivity Changes chart based on Table 5 fixed effects regression coefficients