From Cronies to Professionals: The Evolution of Family Firms
AbstractWe develop a dynamic model where each generation in a family firm can continue operating its inherited production technology or it could hire a professional to do the same. Though the professional is more qualified, his interests are not aligned with the interests of the family. In the context of an overlapping generations framework, we analyze how this tradeoff affects the evolution of the family firm. We find that family firms initially grow in size by accumulating capital and later professionalize their management after reaching a critical size.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 22939.
Date of creation: Nov 1997
Date of revision: Jan 2004
Family firms; Cronies; Moral Hazard;
Find related papers by JEL classification:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
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