Competition, Long Run Contracts, and Internal Inefficiencies in Firms
1991 (English)Report (Other academic)
Internal reward structures in firms are often integral parts of their "culture", and are changed infrequently in comparision to decisions about e.g., output prices. This paper investigates how this feature of firm organization provides a mechanism through which product market competition affects firm's internal efficiency. The design of firms' internal organization is modeled as a choice of an incentive structure between a principal and an agent, with strategic implications for firm's competitive positions on the product market. It is shown that - contrary to popular beliefs - there is a negative relation between the competitiveness of the product market and effort incentives.
Place, publisher, year, edition, pages
Stockholm: IIES , 1991. , 45 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 506
firm organization, competition, incentive contracts
IdentifiersURN: urn:nbn:se:su:diva-41816OAI: oai:DiVA.org:su-41816DiVA: diva2:337820