Commitment in Organizations and the Competition for Talent

Thomas Cooley and Ramon Marimon

The Review of Economic Studies, 2020, vol. 87, issue 5, 2165-2204

Abstract: We show that a change in organizational structure from partnerships to public companies—which weakens contractual commitment—can lead to higher investment in high return-and-risk activities, higher productivity (value added per employee) and greater income dispersion (inequality). These predictions are consistent with the observed evolution of the financial sector where the switch from partnerships to public companies has been especially important in the decades that preceded the 21st Century financial crisis.

Keywords: Partnerships; Public companies; Limited commitment; Directed search; Directed search; Dynamic contracts; Organizational structure; E02; J41; G32; D21; L22; O43 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:87:y:2020:i:5:p:2165-2204.

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