Why is labour-managed firm entry so rare?: An analysis of UK manufacturing data

Why are there so few labour-managed entrants in market economies? We address this question by analysing a panel of labour-managed entrants into UK manufacturing industries. Using Poisson and negative binomial random effects models, our main finding is a significant negative relationship between entry counts and both the capital–labour ratio and the variance of profits. This is consistent with long-standing theoretical arguments that labour-managed firms face problems in raising capital and spreading risk.