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Organizational Modes within Firms and Productivity Growth

Author

Listed:
  • Kohei Daido

    (School of Economics, Kwansei Gakuin University)

  • Ken Tabata

    (School of Economics, Kwansei Gakuin University)

Abstract

This 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 equilibrium h with a low growth rate and gfull decentralization equilibrium h 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.

Suggested Citation

  • Kohei Daido & Ken Tabata, 2010. "Organizational Modes within Firms and Productivity Growth," Discussion Paper Series 59, School of Economics, Kwansei Gakuin University, revised Sep 2010.
    • Handle: RePEc:kgu:wpaper:59
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    File URL: http://192.218.163.163/RePEc/pdf/kgdp59.pdf
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    References listed on IDEAS

    as
    1. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2003. "Vertical Integration and Distance to Frontier," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 630-638, 04/05.
    2. David Martimort & Thierry Verdier, 2004. "The Agency Cost of Internal Collusion and Schumpeterian Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1119-1141.
    3. Alfred D. Chandler, 1969. "Strategy and Structure: Chapters in the History of the American Industrial Enterprise," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530090, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Centralization and Decentralization; Moral Hazard; Social Capital; Multiple Equilibria; Economic Growth; Competitive Policy;
    All these keywords.

    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, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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