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Relational knowledge transfers

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  • Garicano, Luis
  • Rayo, Luis

Abstract

We study how relational contracts mitigate Becker's classic problem of providing general (non-firm-specific) human capital when training contracts are incomplete. The firms profit-maximizing agreement is a multi-period "apprenticeship" in which the novice is trained gradually over time and eventually receives all knowledge. The firm adopts a "1/e rule" whereby at the beginning of the relationship the novice is trained, for free, just enough to produce a fraction 1/e of the efficient output. After that, the novice earns all additional knowledge with labor. This rule causes inefficiently lengthy relationships that grow longer the more patient the players. We discuss policy interventions.

Suggested Citation

  • Garicano, Luis & Rayo, Luis, 2017. "Relational knowledge transfers," LSE Research Online Documents on Economics 79076, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:79076
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    File URL: http://eprints.lse.ac.uk/79076/
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    Cited by:

    1. Fudenberg, Drew & Georgiadis, George & Rayo, Luis, 2021. "Working to learn," Journal of Economic Theory, Elsevier, vol. 197(C).
    2. Lisa Coleman, 2022. "Global Inclusion, Diversity, Belonging, Equity, and Access - GIDBEA. The Architecture of A New Different," Academicus International Scientific Journal, Entrepreneurship Training Center Albania, issue 25, pages 91-103, January.
    3. Zhao, Wei & Mezzetti, Claudio & Renou, Ludovic & Tomala, Tristan, 2024. "Contracting over persistent information," Theoretical Economics, Econometric Society, vol. 19(2), May.
    4. Jason J Sandvik & Richard E Saouma & Nathan T Seegert & Christopher T Stanton, 2020. "Workplace Knowledge Flows," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(3), pages 1635-1680.
    5. Wadud, Zia & Mattioli, Giulio, 2021. "Fully automated vehicles: A cost-based analysis of the share of ownership and mobility services, and its socio-economic determinants," Transportation Research Part A: Policy and Practice, Elsevier, vol. 151(C), pages 228-244.
    6. Baccara, Mariagiovanna & Lee, SangMok & Yariv, Leeat, 2023. "Task allocation and on-the-job training," Journal of Economic Theory, Elsevier, vol. 207(C).
    7. Antoni-Komar, Irene & Rommel, Marius & Posse, Dirk & Wittkamp, Moritz & Paech, Niko, 2021. "Stable Schools in der Solidarischen Landwirtschaft. Ein transdisziplinäres Setting zur Förderung organisationaler Stabilität," 61st Annual Conference, Berlin, Germany, September 22-24, 2021 317057, German Association of Agricultural Economists (GEWISOLA).
    8. Hagiu, Andrei & Wright, Julian, 2015. "Multi-sided platforms," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 162-174.
    9. Heski Bar‐Isaac & Clare Leaver, 2022. "Training, Recruitment, and Outplacement as Endogenous Adverse Selection," Economica, London School of Economics and Political Science, vol. 89(356), pages 849-861, October.
    10. Kukharskyy, Bohdan, 2020. "A tale of two property rights: Knowledge, physical assets, and multinational firm boundaries," Journal of International Economics, Elsevier, vol. 122(C).
    11. Francesc Dilmé & Daniel F. Garrett, 2023. "Relational Contracts: Public versus Private Savings," Econometrica, Econometric Society, vol. 91(3), pages 1025-1075, May.
    12. Purnomo, Agung, 2021. "Teori Kewirausahaan Limpahan Pengetahuan: Inovasi dari Mobilisasi Informasi," OSF Preprints k26vh, Center for Open Science.
    13. Santiago Caicedo & Arthur Seibold & Miguel Espinosa, 2019. "The Effects of Mandating Training in Firms: Theory and Evidence from the Colombian Apprenticeship Program," 2019 Meeting Papers 888, Society for Economic Dynamics.
    14. Zdravkovic, Srdan & Magnusson, Peter & Miocevic, Dario & Westjohn, Stanford A., 2021. "Vicarious animosity: Taking sides on provocative issues," Journal of Business Research, Elsevier, vol. 124(C), pages 77-85.
    15. Adam Feher, 2024. "Guarding Expertise and Assets: Non-competition Agreements and Their Implications," IAAEU Discussion Papers 202404, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    16. Venturini, Roberto & Ceccagnoli, Marco & van Zeebroeck, Nicolas, 2019. "Knowledge integration in the shadow of tacit spillovers: Empirical evidence from U.S. R&D labs," Research Policy, Elsevier, vol. 48(1), pages 180-205.
    17. Cahuc, Pierre & Hervelin, Jérémy, 2024. "The effect of workplace vs school-based vocational education on youth unemployment: Evidence from France," European Economic Review, Elsevier, vol. 162(C).

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    JEL classification:

    • N0 - Economic History - - General
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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