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Cooperation in Knowledge-Intensive Firms

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Author Info
Ola Kvaløy
Trond E. Olsen

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Abstract

The extent to which a knowledge‐intensive firm should induce cooperation between its employees is analyzed in a relational contracting model. We extend the existing literature on agent cooperation by analyzing the implications of incomplete contracts and agent holdup. A main result is that if the agents’ holdup power is sufficiently high, it is suboptimal to implement cooperation, even if helping effort is productive. This implies, contrary to many property rights models, that surplus may suffer if the investing parties (the agents) are residual claimants. We also show that long‐term relationships facilitate cooperation even if agents cannot monitor or punish each other.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?id=doi:10.1086/597800
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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Human Capital.

Volume (Year): 2 (2008)
Issue (Month): 4 ()
Pages: 410-440
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Handle: RePEc:ucp:jhucap:v:2:i:4:y:2008:p:410-440

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  2. Itoh, Hideshi, 1992. "Cooperation in Hierarchical Organizations: An Incentive Perspective," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(2), pages 321-45, April.
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  6. Ola Kvaløy & Trond E. Olsen, 2006. "Team Incentives in Relational Employment Contracts," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 139-170, January. [Downloadable!]
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  7. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December. [Downloadable!] (restricted)
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  8. George Baker & Robert Gibbons & Kevin J. Murphy, 2002. "Relational Contracts And The Theory Of The Firm," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 39-84, February. [Downloadable!] (restricted)
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  10. Ramakrishnan, Ram T S & Thakor, Anjan V, 1991. "Cooperation versus Competition in Agency," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(2), pages 248-83, Fall.
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  19. John S. Heywood & Uwe Jirjahn & Georgi Tsertsvadze, 2005. "Getting along with Colleagues - Does Profit Sharing Help or Hurt?," Kyklos, Blackwell Publishing, vol. 58(4), pages 557-573, November. [Downloadable!] (restricted)
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  25. Yeon-Koo Che & Seung-Weon Yoo, 2001. "Optimal Incentives for Teams," American Economic Review, American Economic Association, vol. 91(3), pages 525-541, June. [Downloadable!] (restricted)
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