The Internal Organization of the Firm, Transaction Costs, and Macroeconomic Growth
AbstractThis article analyzes the links between the internal organization of the firm and macroeconomic growth. We present a Schumpeterian growth model in which firms face agency costs due to the existence of asymmetries of information and the formation of vertical collusions inside those firms. To respond to the threat of collusion, optimal collusion-proof incentive contracts depend on the efficiency of collusive side contracting within organizations. Collusion affects therefore the firms' profitability, the incentives to innovate, and, finally, the stationary equilibrium growth rate of the economy. On the other hand, when the growth rate is small, the prospects of long-term relationships within firms increase the agents' incentives to invest in a better collusive technology. We then discuss the two-way relationships between the structure of internal transaction costs, organizational technologies, and macroeconomic growth. Copyright 2000 by Kluwer Academic Publishers
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Bibliographic InfoArticle provided by Springer in its journal Journal of Economic Growth.
Volume (Year): 5 (2000)
Issue (Month): 4 (December)
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Web page: http://www.springerlink.com/link.asp?id=102931
Other versions of this item:
- Martimort, D. & Verdier, T., 1999. "The Internal Organization of the Firm, Transaction Costs and Macroeconomic Growth," Papers 1999-08, Laval - Laboratoire Econometrie.
- Martimort, D. & Verdier, T., 1999. "The Internal Organization of the Firm, Transaction Costs and Macroeconomic Growth," DELTA Working Papers 1999-08, DELTA (Ecole normale supérieure).
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
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- Francois, P. & Lloyd-Ellis, H., 2003. "Co-movement, Capital and Contracts: 'Normal' Cycles Through Creative Destruction," Discussion Paper 2003-62, Tilburg University, Center for Economic Research.
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