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Organizational Design with Portable Skills

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Abstract

Workers can move across firms and carry along portable human capital. I present a model where workers' talent is observable but task allocation is non-contractible. To reduce mobility firms may inefficiently match workers with tasks that reduce their outside option. I show that by organizing the firm as an equity-partnership, the efficient task allocation can be implemented and profits increase. This result is attained by shifting control rights to workers who become partners, decide over task allocation and earn dividends as compensation. This provides a new rationale for the widespread presence of firms organized as partnerships in human-capital intensive industries.

Suggested Citation

  • Luca Picariello, 2019. "Organizational Design with Portable Skills," CSEF Working Papers 546, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:546
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    References listed on IDEAS

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    1. Andrés Donangelo, 2014. "Labor Mobility: Implications for Asset Pricing," Journal of Finance, American Finance Association, vol. 69(3), pages 1321-1346, June.
    2. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    3. Luca Picariello, 2019. "Promotions and Training: Do Competitive Firms Set the Bar too High?," CSEF Working Papers 552, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    4. James B. Rebitzer & Lowell J. Taylor, 2007. "When Knowledge Is an Asset: Explaining the Organizational Structure of Large Law Firms," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 201-229.
    5. Arijit Mukherjee & Luís Vasconcelos, 2012. "Star Wars: Exclusive Talent and Collusive Outcomes in Labor Markets," Journal of Law, Economics, and Organization, Oxford University Press, vol. 28(4), pages 754-782, October.
    6. Bruce C. Greenwald, 1986. "Adverse Selection in the Labour Market," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 325-347.
    7. Bar-Isaac, Heski & Levy, Raphaël, 2019. "Motivating employees through career paths," CEPR Discussion Papers 13828, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Nguyen-Ones, Mai & Steen, Frode, 2018. "Measuring Market Power in Gasoline Retailing: A Market- or Station Phenomenon?," Discussion Paper Series in Economics 6/2018, Norwegian School of Economics, Department of Economics.
    2. Luca Picariello, 2019. "Promotions and Training: Do Competitive Firms Set the Bar too High?," CSEF Working Papers 552, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    3. Bar-Isaac, Heski & Levy, Raphaël, 2019. "Motivating employees through career paths," CEPR Discussion Papers 13828, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Task Allocation; Retention; Control Rights; Partnerships.;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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