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Coordination under the Shadow of Career Concerns

  • Koch, Alexander K.

    ()

    (Aarhus University)

  • Morgenstern, Albrecht

    ()

    (Federal Ministry of Finance)

To innovate, employees need to develop novel ideas and coordinate with each other to turn these ideas into better products and services. Work outcomes provide signals about employees' abilities to the labor market, and therefore career concerns arise. These can both be 'good' (enhancing incentives for effort in developing ideas) and 'bad' (preventing voluntary coordination). Our model shows how the firm designs its explicit incentive system and organizes work processes to take these conflicting forces into account. The comparative statics results suggest a link between the increased use of teams and recent changes in labor market returns to skills.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4039.

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Length: 40 pages
Date of creation: Feb 2009
Date of revision:
Publication status: published in: B.E. Journal of Theoretical Economics: Topics in Theoretical Economics , 2010, 10 (1), Article 10
Handle: RePEc:iza:izadps:dp4039
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