The Firm as a Dedicated Hierarchy: A Theory of the Origins and Growth of Firms
Raghuram Rajan and
Luigi Zingales
The Quarterly Journal of Economics, 2001, vol. 116, issue 3, 805-851
Abstract:
In the formative stages of their businesses, entrepreneurs have 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 determines the organization's internal structure, growth, and its eventual size. Large, steep hierarchies will predominate in physical-capital-intensive industries, and will have seniority-based promotion policies. By contrast, flat hierarchies will prevail in human-capital-intensive industries and will have up-or-out promotion systems. 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.
Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (245)
Downloads: (external link)
http://hdl.handle.net/10.1162/00335530152466241 (application/pdf)
Access to full text is restricted to subscribers.
Related works:
Working Paper: The Firm as a Dedicated Hierarchy: A Theory of the Origin and Growth of Firms (2000) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:116:y:2001:i:3:p:805-851.
Ordering information: This journal article can be ordered from
https://academic.oup.com/journals
Access Statistics for this article
The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva
More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().