Fighting for Talent: Risk-Taking, Corporate Volatility, and Organizational Change
During the nineties, talented workers began to spurn secure jobs in large organizations, which were formerly considered prestigious. They developed more positive attitudes towards jobs in small, innovative startups, although these involved less job security. We build a model that identifies some of the economic forces behind the shift in the supply for talent from large to small firms. Small firms with little capital at stake take excessive risk. They realize more of their workers' risky ideas, which allows to poach creative workers from better capitalized firms. We show that small firms' advantage in attracting creative workers emerges if ideas have ex ante positive net present value and increases if workers can smooth consumption through financial markets. As small firms take excessive risk, average enterprise profitability in the affected sectors decreases, while bankruptcy increases. Moreover, large firms react through inefficient organizational changes. We also provide some empirical evidence consistent with the implications of our theory.
|Date of creation:||2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.EconomicDynamics.org/society.htmEmail:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michelacci, C. & Suarez, J., 2000.
"Business Creation and the Stock Market,"
0009, Centro de Estudios Monetarios Y Financieros-.
- Claudio Michelacci & Javier Suarez, 2004. "Business Creation and the Stock Market," Review of Economic Studies, Wiley Blackwell, vol. 71(2), pages 459-481, 04.
- Claudio Michelacci & Javier Suarez, 2004. "Business Creation and the Stock Market," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 459-481.
- Claudio Michelacci & Javier Suarez, 2000. "Business Creation and the Stock Market," Econometric Society World Congress 2000 Contributed Papers 0673, Econometric Society.
- Michelacci, Claudio & Suarez, Javier, 2002. "Business Creation and the Stock Market," CEPR Discussion Papers 3513, C.E.P.R. Discussion Papers.
- Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1994.
"Income Risk, Borrowing Constraints and Portfolio Choice,"
CEPR Discussion Papers
888, C.E.P.R. Discussion Papers.
- Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1996. "Income Risk, Borrowing Constraints, and Portfolio Choice," American Economic Review, American Economic Association, vol. 86(1), pages 158-72, March.
- Luigi Guiso & Monica Paiella, 2008.
"Risk Aversion, Wealth, and Background Risk,"
Journal of the European Economic Association,
MIT Press, vol. 6(6), pages 1109-1150, December.
- Luigi Guiso & Monica Paiella, 2003. "Risk Aversion, Wealth and Background Risk," Temi di discussione (Economic working papers) 483, Bank of Italy, Economic Research and International Relations Area.
- Guiso, Luigi & Paiella, Monica, 2001. "Risk Aversion, Wealth and Background Risk," CEPR Discussion Papers 2728, C.E.P.R. Discussion Papers.
- Monica Paiella & Luigi Guiso, 2004. "Risk Aversion, Wealth and Background Risk," 2004 Meeting Papers 525, Society for Economic Dynamics.
- Luigi Guiso & Monica Paiella, 2007. "Risk Aversion, Wealth, and Background Risk," Economics Working Papers ECO2007/47, European University Institute.
When requesting a correction, please mention this item's handle: RePEc:red:sed007:263. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.