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Organizational Modes within Firms and Productivity Growth

  • Kohei Daido

    ()

    (School of Economics, Kwansei Gakuin University)

  • Ken Tabata

    ()

    (School of Economics, Kwansei Gakuin University)

This paper develops a simple growth model with moral hazard contracting to examine the interactions between the organizational mode of firms and economic productivity growth. The organizational mode of firms differs in terms of the degree to which decisions of R&D investment are delegated to a manager. We show that the market size restricts the extent of delegation with respect to R&D, which in turn determines the productivity growth rate of the economy. We then show that there exist multiple equilibria: gpartial decentralization equilibriumh with a low growth rate and gfull decentralization equilibriumh with a high growth rate. Finally, we study the effects of social capital and competition on equilibrium organizational modes and show that, under some parametric conditions, these factors induce more decentralized organization and higher productivity growth while lowering the risk of the economy converging to a poverty trap.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp59.pdf
File Function: First version, 2010
Download Restriction: no

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 59.

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Length: 46 pages
Date of creation: Sep 2010
Date of revision: Sep 2010
Handle: RePEc:kgu:wpaper:59
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  1. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2003. "Vertical Integration and Distance to Frontier," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 630-638, 04/05.
  2. Alfred D. Chandler, 1969. "Strategy and Structure: Chapters in the History of the American Industrial Enterprise," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530090, June.
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