The incremental innovations that underly much of modern economic growth typically involve changes to one or more components of a complex product. This creates a tension. On the one hand, a principal would like an agent to contribute innovative components. On the other hand, ironing out incompatibilities between interdependent components can be a drain on the principal's energies. The principal can conserve her energies by tightly controlling the innovation process, but this may inadvertently stifle the agent's incentive to innovate. We show precisely how this tension between creating knowledge and controlling knowledge shapes organizational forms. The novel concepts introduced are illustrated with case studies of the flat panel cathode ray tube industry and Boeing's recent location decisions.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
9121.
Length: Date of creation: Aug 2002 Date of revision: Handle: RePEc:nbr:nberwo:9121
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Find related papers by JEL classification: O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Gene M. Grossman & Elhanan Helpman, 2002.
"Outsourcing versus FDI in Industry Equilibrium,"
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148, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
[Downloadable!]
Pol Antràs & Elhanan Helpman, 2003.
"Global Sourcing,"
NBER Working Papers
10082, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Dalia Marin & Thierry Verdier, 2001.
"Power Inside the Firm and the Market: A General Equilibrium Approach,"
Discussion Papers
109, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich, revised Apr 2006.
[Downloadable!]