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Endogenous Spillovers, Increased Competition and Re-organization Waves

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Author Info
Diego Rodríguez
Abstract

We consider an entrepreneur that is the sole producer of a cost reducing skill, but the entrepreneur that hires a team to use the skill cannot prevent collusive trade for the innovation related knowledge between employees and competitors. We show that there are two types of diffusion avoiding strategies for the entrepreneur to preempt collusive communication i) setting up a large productive capacity (the traditional firm) and ii) keeping a small team (the lean firm). The traditional firm is characterized by its many "marginal" employees that work short days, receive flat wages and are incompletely informed about the innovation. The lean firm is small in number of employees, engages in complete information sharing among members, that are paid with stock option schemes. We find that the lean firm is superior to the traditional firm when technological entry costs are low and when the sector is immature.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/352.pdf
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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 352.

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Date of creation: Jan 1999
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Handle: RePEc:upf:upfgen:352

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Web page: http://www.econ.upf.edu/

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Related research
Keywords: Information sharing; endogenous spillovers; physical assets; corporate transformation; stock-options; collussion; trade secrets;

Find related papers by JEL classification:
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives

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This page was last updated on 2009-12-18.

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