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Designing Governance Mechanisms for Knowledge-Intensive

Author

Listed:
  • Alfonso Gambardella

    (KITES Bocconi University, Milan, Italy)

  • Claudio Panico

    (KITES Bocconi University, Milan, Italy)

Abstract

Knowledge-intensive activities are bound by imperfections that limit the provision of incentives, particularly asymmetric information about inputs and unclear definition of outputs. Thus, performance-based incentives are not possible. We then model a contract in which the firm can use the delegation of decision rights to provide incentives. The main argument is that a fine-tuned allocation of decision rights reduces the information rents of a knowledge provider by offsetting her strategic use of the information advantage. We show that when the firm owns strong complementary assets to leverage the provider's knowledge, the delegation of decision rights can fully resolve the limitations due to asymmetric information. When this condition is not met, the provider is offered full autonomy, but it is optimal for the firm to let the most knowledgeable providers go. We also discuss the generality of our approach.

Suggested Citation

  • Alfonso Gambardella & Claudio Panico, 2009. "Designing Governance Mechanisms for Knowledge-Intensive," KITeS Working Papers 019, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised May 2009.
    • Handle: RePEc:cri:cespri:kites19_wp
    as

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    File URL: ftp://ftp.unibocconi.it/pub/RePEc/cri/papers/KitesWP19.pdf
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    References listed on IDEAS

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    1. repec:dau:papers:123456789/985 is not listed on IDEAS
    2. Jean-Etienne de Bettignies & Gilles Chemla, 2008. "Corporate Venturing, Allocation of Talent, and Competition for Star Managers," Management Science, INFORMS, vol. 54(3), pages 505-521, March.
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    More about this item

    Keywords

    Knowledge; Research; Spinoffs; Governance; Contracts; Adverse Selection;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • 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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