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Endogenous spillovers, increased competition and re-organization waves

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  • Diego Rodríguez
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    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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    Bibliographic 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/

    Related research

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

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