Organizational Modes within Firms and Productivity Growth
AbstractThis paper develops a simple growth model with moral hazard contracting to examine the interactions between the organizational mode of firms and economic productivity growth. The organizational mode of firms differs in terms of the degree to which decisions of R&D investment are delegated to a manager. We show that the market size restricts the extent of delegation with respect to R&D, which in turn determines the productivity growth rate of the economy. We then show that there exist multiple equilibria: gpartial decentralization equilibriumh with a low growth rate and gfull decentralization equilibriumh with a high growth rate. Finally, we study the effects of social capital and competition on equilibrium organizational modes and show that, under some parametric conditions, these factors induce more decentralized organization and higher productivity growth while lowering the risk of the economy converging to a poverty trap.
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Bibliographic InfoPaper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 59.
Length: 46 pages
Date of creation: Sep 2010
Date of revision: Sep 2010
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Centralization and Decentralization; Moral Hazard; Social Capital; Multiple Equilibria; Economic Growth; Competitive Policy;
Find related papers by JEL classification:
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-02 (All new papers)
- NEP-BEC-2010-10-02 (Business Economics)
- NEP-FDG-2010-10-02 (Financial Development & Growth)
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