Governance of Knowledge-Intensive Firms in the Modern Market Economy

Vicente Salas-Fumas

International Journal of the Economics of Business, 2010, vol. 17, issue 3, 349-372

Abstract: We model contracting for joint production between workers and shareholders when investment in knowledge is non-verifiable and the resulting specific human capital embedded in the workers is non-tradable. The model explains how the effective cost of human capital services will vary depending on whether the investment in knowledge is financed by the workers or by the shareholders. We apply the results of the modeling to identify which firms are expected to gain and which to lose from posted trends in higher employability and lower empowerment of workers in modern market economies. Finally, we present conditions on the self-interest of current shareholders to empower workers as a way to stimulate their investment in firm-specific human capital.

Keywords: Corporate Governance; Specific Human Capital; Stakeholders; Knowledge Management (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1080/13571516.2010.513811

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