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Commitment in Organizations and the Competition for Talent

Author

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  • Thomas Cooley
  • Ramon Marimon

Abstract

We show that a change in organizational structure from partnerships to public companies—which weakens contractual commitment—can lead to higher investment in high return-and-risk activities, higher productivity (value added per employee) and greater income dispersion (inequality). These predictions are consistent with the observed evolution of the financial sector where the switch from partnerships to public companies has been especially important in the decades that preceded the 21st Century financial crisis.

Suggested Citation

  • Thomas Cooley & Ramon Marimon, 2020. "Commitment in Organizations and the Competition for Talent," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(5), pages 2165-2204.
    • Handle: RePEc:oup:restud:v:87:y:2020:i:5:p:2165-2204.
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    File URL: http://hdl.handle.net/10.1093/restud/rdaa008
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    Citations

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    Cited by:

    1. Arnold, Lutz G. & Zelzner, Sebastian, 2022. "Financial trading versus entrepreneurship: Competition for talent and negative feedback effects," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 186-199.
    2. Shenzhe Jiang & Junjie Xia & Jiajun Xu & Jianye Yan, 2023. "A theory of National Development Bank: long-term investment and the agency problem," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 76(3), pages 995-1024, October.
    3. Kirill Shakhnov, 2022. "The Allocation of Talent: Finance versus Entrepreneurship," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 46, pages 161-195, October.
    4. Liyan Shi, 2023. "Optimal Regulation of Noncompete Contracts," Econometrica, Econometric Society, vol. 91(2), pages 425-463, March.

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