Explaining Organizational Diseconomies of Scale in R&D: Agency Problems and the Allocation of Engineering Talent, Ideas, and Effort by Firm Size
AbstractThe comparative efficiency and success of small firms in R&D remains largely unexplained. This paper empirically examines scale diseconomies in offering employment contracts as an explanation for diseconomies of scale in R&D. The paper argues that small firms more efficiently resolve the severe agency problems of hidden information and hidden behavior in R&D. Small firms more efficiently offer contracts that reward performance than large firms, and consequently, small firms attract and retain engineers with higher ability and skill. Further, small firms through these more performance-contingent contracts induce higher levels of effort than large firms. The study tests and generally confirms these hypotheses using data collected from 912 current and former engineering employees of two large high-technology companies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 40 (1994)
Issue (Month): 6 (June)
diseconomies of scale; compensation; job mobility; self-selection; agency theory; firm size and innovation;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Lee, In Hyeock & Rugman, Alan M., 2012. "Firm-specific advantages, inward FDI origins, and performance of multinational enterprises," Journal of International Management, Elsevier, vol. 18(2), pages 132-146.
- Harvey S. James Jr., 1997. "A Legal Basis for Workers as Agents: Employment Contracts, Common Law, and the Theory of the Firm," Law and Economics 9705001, EconWPA, revised 04 Feb 2002.
- Claire Bonnard, 2011. "Les incitations à l'innovation dans le secteur privé," Post-Print halshs-00599700, HAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.