|
Raghuram G. Rajan, Luigi Zingales
NBER Working Paper No. 7546*
Issued in February 2000
NBER Program(s): CF
---- Abstract -----
A fundamental problem entrepreneurs face in the formative stages of their businesses is how to provide incentives for employees to protect, rather than steal, the source of organizational rents. We study how the entrepreneur's response to this problem will determine the organization's internal structure, growth, and its eventual size. In particular, our model suggests large, steep hierarchies will predominate in physical capital intensive industries, and these will typically have seniority-based promotion policies. By contrast, flat hierarchies will be seen in human capital intensive industries. These will have up-or-out promotion systems, where experienced managers either become owners or are fired. Furthermore, flat hierarchies will have more distinctive technologies or cultures than steep hierarchies. The model points to some essential differences between organized hierarchies and markets.
*Published: Rajan, Raghuram G. and Luigi Zingales. "The Firm As A Dedicated Hierarchy: A Theory Of The Origins And Growth Of Firms," Quarterly Journal of Economics, 2001, v116(3,Aug), 805-851.
Would you like an annual subscription to NBER Working Papers? Click
here for more information.
You may purchase this paper on-line in .pdf format
from SSRN.com ($5) for electronic delivery.
Information for subscribers and others expecting no-cost downloads
Machine-readable bibliographic record -
MARC,
RIS,
BibTeX
| 
