Firm Foundations and Human Capital Investments : the O-Ring Approach to Organizational Equilibrium in an Emerging Industry

Fabel, Oliver

Firm Foundations and Human Capital Investments : the O-Ring Approach to Organizational Equilibrium in an Emerging Industry

Dateien

03-02.pdf(412.3 KB)

Datum

2003

Autor:innen

Fabel, Oliver

Schriftenreihe

Diskussionspapiere der DFG-Forschergruppe Heterogene Arbeit; 03/02

Publikationstyp

Working Paper/Technical Report

Zusammenfassung

The current analysis introduces human capital investments which as all other investment projects must be carried out given ex-ante uncertain returns. This return uncertainty reflects that particular ex-post ability realizations may or may not induce the possibility to engage in profitable entrepreneurial activity. Managed firms which recruit randomly while offering a certain wage-income cannot be kept from entering the industry. However, if it is individual beneficial to seek employment in such firms, given that human capital investments are sunk, the resulting industry structure provides less incentives to invest than a purely entrepreneurial industry. While it remains true that entrepreneurial firms if they exist are founded by teams of superior realized abilities, the equilibrium analysis reveals a rather different perspective of the incentive mechanism. Human capital investments are not so much necessary in order to induce entrepreneurial activity. Rather, entrepreneurial activity provides the effective incentives to invest in human capital. This distinction is important to note. Due to the risk-shifting property associated with employment in managed firms, policies directed at maximizing entrepreneurial activities will generally fail to implement an efficient solution. As with every other incentive mechanism, incentive compatibility constitutes a constraint on the possibility to achieve a first-best solution.

Fachgebiet (DDC)

330 Wirtschaft

Schlagwörter

Unternehmensgründungen,O-Ring Theorie,Humankapitalinvestition,Marktselektion,Risikoverteilung,Firm Foundations,O-Ring Theorie,Human Capital Investments,Market Selection,Risk-Shifting

Zitieren

ISO 690

FABEL, Oliver, 2003. Firm Foundations and Human Capital Investments : the O-Ring Approach to Organizational Equilibrium in an Emerging Industry

BibTex

@techreport{Fabel2003Found-12189,
  year={2003},
  series={Diskussionspapiere  der DFG-Forschergruppe Heterogene Arbeit},
  title={Firm Foundations and Human Capital Investments : the O-Ring Approach to Organizational Equilibrium in an Emerging Industry},
  number={03/02},
  author={Fabel, Oliver}
}

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