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Cooperation in knowledge-intensive firms

  • Kvaløy, Ola

    ()

    (Norwegian School of Hotel Management, Dept. of Business Administration, University of Stavanger)

  • Olsen, Trond E.

    ()

    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

The extent to which a knowledge-intensive firm should induce cooperation between its employees is analyzed in a model of relational contracting between a firm (principal) and its employees (two agents). The agents can cooperate by helping each other, i.e. provide effort that increases the performance of their peer without affecting their own performance. We extend the existing literature on agent-cooperation by analyzing the implications of incomplete contracts and agent hold-up. A main result is that if the agents' hold-up power is sufficiently high, then it is suboptimal for the principal to implement cooperation, even if helping effort is productive per se. This implies, contrary to many property rights models, that social surplus may suffer if the investing parties (here the agents) are residual claimants. The model also shows that long-term relationships facilitate cooperation even if the agents cannot monitor or punish each others effort choices.

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File URL: http://hdl.handle.net/11250/163906
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Paper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2007/27.

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Length: 32 pages
Date of creation: 30 Nov 2007
Date of revision:
Handle: RePEc:hhs:nhhfms:2007_027
Contact details of provider: Postal:
NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway

Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
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  8. Kvaløy, Ola & Olsen, Trond E., 2005. "Team Incentives in Relational Employment Contracts," Discussion Papers 2005/7, Department of Business and Management Science, Norwegian School of Economics.
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  12. Kvaløy, Ola & Olsen, Trond E., 2008. "Relative performance evaluation, agent hold-up and firm organization," Journal of the Japanese and International Economies, Elsevier, vol. 22(2), pages 229-241, June.
  13. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
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  15. Hart, Oliver D. & Moore, John, 1990. "Property Rights and the Nature of the Firm," Scholarly Articles 3448675, Harvard University Department of Economics.
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  18. FitzRoy, Felix R. & Kraft, Kornelius, 1995. "On the choice of incentives in firms," Journal of Economic Behavior & Organization, Elsevier, vol. 26(1), pages 145-160, January.
  19. Macho-Stadler, I. & Perez-Castrillo, J.D., 1991. "Moral Hazard with Several Agents: The Gains From Cooperation," DELTA Working Papers 91-26, DELTA (Ecole normale supérieure).
  20. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers 10A, UCLA Department of Economics.
  21. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May.
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  23. Drago, Robert & Turnbull, Geoffrey K., 1991. "Competition and cooperation in the workplace," Journal of Economic Behavior & Organization, Elsevier, vol. 15(3), pages 347-364, May.
  24. MacLeod, W Bentley & Malcomson, James M, 1989. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Econometrica, Econometric Society, vol. 57(2), pages 447-80, March.
  25. John S. Heywood & Uwe Jirjahn & Georgi Tsertsvadze, 2005. "Getting along with Colleagues - Does Profit Sharing Help or Hurt?," Kyklos, Wiley Blackwell, vol. 58(4), pages 557-573, November.
  26. Junichiro Ishida, 2006. "Team Incentives under Relative Performance Evaluation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 187-206, 03.
  27. Roy Radner, 1986. "Repeated Partnership Games with Imperfect Monitoring and No Discounting," Review of Economic Studies, Oxford University Press, vol. 53(1), pages 43-57.
  28. Emmanuelle Auriol & Guido Friebel & Lambros Pechlivanos, 2002. "Career Concerns in Teams," Journal of Labor Economics, University of Chicago Press, vol. 20(2), pages 289-307, Part.
  29. Itoh, Hideshi, 1992. "Cooperation in Hierarchical Organizations: An Incentive Perspective," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(2), pages 321-45, April.
  30. Ramakrishnan, Ram T S & Thakor, Anjan V, 1991. "Cooperation versus Competition in Agency," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(2), pages 248-83, Fall.
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