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Organizational Form and the Market for Talent

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  • BÃ¥rd Harstad

Abstract

This article brings together the market for products, the market for talent, and firms’ organizational form. While the organizational design determines the allocation of blame and fame within the firm, the value of a good reputation depends on the market structure. Consequently, the market structure dictates the optimal organizational design. If competition becomes tougher and the market thicker, transparent firms decentralize while nontransparent firms concentrate control, transparency itself is improved, corporations switch from unitary to multidivisional form, and the turnover of managers increases. The model rationalizes recent trends in both executive pay and organizational design.

Suggested Citation

  • BÃ¥rd Harstad, 2007. "Organizational Form and the Market for Talent," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 581-611.
  • Handle: RePEc:ucp:jlabec:v:25:y:2007:p:581-611
    DOI: 10.1086/512745
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    Cited by:

    1. Heski Bar-Isaac & Juanjo Ganuza, 2005. "Teaching to the top and searching for superstars," Working Papers 05-06, New York University, Leonard N. Stern School of Business, Department of Economics.

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