Endogenous spillovers, increased competition and re-organization waves

Diego Rodríguez

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We consider an entrepreneur that is the sole producer of a cost reducing skill, but the entrepreneur that hires a team to use the skill cannot prevent collusive trade for the innovation related knowledge between employees and competitors. We show that there are two types of diffusion avoiding strategies for the entrepreneur to preempt collusive communication i) setting up a large productive capacity (the traditional firm) and ii) keeping a small team (the lean firm). The traditional firm is characterized by its many "marginal" employees that work short days, receive flat wages and are incompletely informed about the innovation. The lean firm is small in number of employees, engages in complete information sharing among members, that are paid with stock option schemes. We find that the lean firm is superior to the traditional firm when technological entry costs are low and when the sector is immature.

Keywords: Information sharing; endogenous spillovers; physical assets; corporate transformation; stock-options; collussion; trade secrets (search for similar items in EconPapers)
JEL-codes: C70 D23 D43 D82 L11 L22 O31 (search for similar items in EconPapers)
Date: 1999-01
New Economics Papers: this item is included in nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:352

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