Disagreements, employee spinoffs and the choice of technology
AbstractMost existing models of employee spinoffs assume they are driven by a desire to implement new ideas. However, history is replete with examples of spinoffs that were launched to continue with old ideas that their parents were in the process of abandoning. We develop a model of technology choice in which spinoffs may form to implement new or old technologies. A team of managers engaged in production using technology x, is considering switching to technology y. The value of y is not known and disagreements may emerge among team members. Managers who develop sufficiently strong disagreements with their colleagues choose to form new companies to implement their preferred strategy. Two distinct classes of spinoffs arise. In the first, a spinoff forms when an employee comes to believe it is worth adopting y but the firm does not. In the second, a spinoff arises when an employee sufficiently disagrees with the firmmodifier letter apostrophes decision to adopt y that he is willing to invest in order to continue with x. We explore the implications of the model for the comparative dynamics of spinoff formation, and the performance of firms. (Copyright: Elsevier)
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Volume (Year): 14 (2011)
Issue (Month): 3 (July)
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- Jing Chen & Peter Thompson, 2010. "Code files for "Disagreements, Employee Spinoffs and the Choice of Technology"," Computer Codes 09-182, Review of Economic Dynamics.
- L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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