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Employer-Employee Profit-Sharing and the Incentives to Innovate when the Dismissal Regulation Matters

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  • Filippo Belloc

Abstract

We develop a simple incomplete-contract model of the relationship between worker participation to revenue sharing and innovation performance of firms, under firing regimes with different stringency. Stronger worker participation to profits is shown to increase innovation probability when employer-side hold-up is prevented by stringent layoff regulation and the human capital matters signicantly. Vice-versa, under a strict layoff regulation, when the financial capital is relatively more important, the effects of worker participation devices may be reduced or inverted. Our results may help in understanding why there is no one-size-fits-all optimal strategy in the design of worker financial participation mechanisms for knowledge-intensive productions

Suggested Citation

  • Filippo Belloc, 2019. "Employer-Employee Profit-Sharing and the Incentives to Innovate when the Dismissal Regulation Matters," Department of Economics University of Siena 799, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:799
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    More about this item

    Keywords

    prot-sharing; dismissal regulation; hold-up; innovation.;
    All these keywords.

    JEL classification:

    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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