Experience Benefits and Firm Organization
A principal needs a worker for the production of a good. The worker can be hired as an internal agent, or an external agent under a contract. These two organizational modes correspond to in-house production and outsourcing, respectively. In each case, the agent earns experience benefits: future monetary returns from managing production, reputation, and enjoyment. The principal would like to extract experience benefits, and can do so when production is outsourced. However, the external agent earns information rent from private information about production costs. The principal cannot fully extract experience benefits when production is in-house because the internal agent must be provided with a minimum income, although the principal has full information on production costs. Our theory proposes a new trade-off, one between information rent under outsourcing and experience rent under in-house production. The principal chooses outsourcing when experience benefits are high, but her organizational choice may be socially inefficient.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 12 (2012)
Issue (Month): 1 (September)
|Contact details of provider:|| Web page: http://www.degruyter.com|
|Order Information:||Web: http://www.degruyter.com/view/j/bejeap|
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.:
- Christoph Luelfesmann, 2000.
"The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments,"
Econometric Society World Congress 2000 Contributed Papers
0659, Econometric Society.
- Anke S. Kessler & Christoph Lülfesmann, 2006. "The Theory of Human Capital Revisited: on the Interaction of General and Specific Investments," Economic Journal, Royal Economic Society, vol. 116(514), pages 903-923, October.
- Anke S. Kessler & Christoph Lülfesmann, 2002. "The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments," CESifo Working Paper Series 776, CESifo Group Munich.
- Kessler, Anke & Lülfesmann, Christoph, 2000. "The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments," CEPR Discussion Papers 2533, C.E.P.R. Discussion Papers.
- Jacques Cremer & Luis Garicano & Andrea Prat, 2006.
"Language and the Theory of the Firm,"
784828000000000373, UCLA Department of Economics.
- Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
- Bengt Holmstrom, 1999.
"Managerial Incentive Problems: A Dynamic Perspective,"
NBER Working Papers
6875, National Bureau of Economic Research, Inc.
- Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 169-82, January.
- Gonzalez-Diaz, Manuel & Arrunada, Benito & Fernandez, Alberto, 2000.
"Causes of subcontracting: evidence from panel data on construction firms,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 42(2), pages 167-187, June.
- Manuel González & Benito Arruñada & Alberto Fernández, 1999. "Causes of subcontracting: Evidence from panel data on construction firms," Economics Working Papers 428, Department of Economics and Business, Universitat Pompeu Fabra.
- Joan Ramon Rosés, 2005.
"Subcontracting and vertical integration in the Spanish cotton industry,"
Economics Working Papers
816, Department of Economics and Business, Universitat Pompeu Fabra.
- Joan R. Roses, 2005. "Subcontracting and Vertical Integration in the Spanish Cotton Industry," Working Papers in Economic History wh051302, Universidad Carlos III, Instituto Figuerola de Historia y Ciencias Sociales.
- Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
- Hubbard, Thomas N, 2001. "Contractual Form and Market Thickness in Trucking," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 369-86, Summer.
- Rosen, Sherwin, 1972. "Learning by Experience as Joint Production," The Quarterly Journal of Economics, MIT Press, vol. 86(3), pages 366-82, August.
- Ingela Alger & Régis Renault, 2007.
"Screening Ethics when Honest Agents Keep their Word,"
Springer, vol. 30(2), pages 291-311, February.
- Ingela Alger & Regis Renault, 2003. "Screening Ethics when Honest Agents Keep their Word," Boston College Working Papers in Economics 562, Boston College Department of Economics, revised 09 Nov 2004.
- Masten, Scott E. & Meehan, James Jr. & Snyder, Edward A., 1989. "Vertical integration in the U.S. auto industry : A note on the influence of transaction specific assets," Journal of Economic Behavior & Organization, Elsevier, vol. 12(2), pages 265-273, October.
- Masten, Scott E, 1988. "A Legal Basis for the Firm," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(1), pages 181-98, Spring.
When requesting a correction, please mention this item's handle: RePEc:bpj:bejeap:v:12:y:2012:i:1:n:39. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.