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

Files

03-02.pdf(412.3 KB)

Date

2003

Authors

Fabel, Oliver

Series

Diskussionspapiere der DFG-Forschergruppe Heterogene Arbeit; 03/02

Publication type

Working Paper/Technical Report

Abstract

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.

Subject (DDC)

330 Economics

Keywords

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

Cite This

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}
}

RDF

<rdf:RDF
    xmlns:dcterms="http://purl.org/dc/terms/"
    xmlns:dc="http://purl.org/dc/elements/1.1/"
    xmlns:rdf="http://www.w3.org/1999/02/22-rdf-syntax-ns#"
    xmlns:bibo="http://purl.org/ontology/bibo/"
    xmlns:dspace="http://digital-repositories.org/ontologies/dspace/0.1.0#"
    xmlns:foaf="http://xmlns.com/foaf/0.1/"
    xmlns:void="http://rdfs.org/ns/void#"
    xmlns:xsd="http://www.w3.org/2001/XMLSchema#" > 
  <rdf:Description rdf:about="https://kops.uni-konstanz.de/server/rdf/resource/123456789/12189">
    <dcterms:isPartOf rdf:resource="https://kops.uni-konstanz.de/server/rdf/resource/123456789/46"/>
    <dc:language>eng</dc:language>
    <dcterms:title>Firm Foundations and Human Capital Investments : the O-Ring Approach to Organizational Equilibrium in an Emerging Industry</dcterms:title>
    <dcterms:available rdf:datatype="http://www.w3.org/2001/XMLSchema#dateTime">2011-03-25T09:43:19Z</dcterms:available>
    <dcterms:rights rdf:resource="https://rightsstatements.org/page/InC/1.0/"/>
    <dc:date rdf:datatype="http://www.w3.org/2001/XMLSchema#dateTime">2011-03-25T09:43:19Z</dc:date>
    <void:sparqlEndpoint rdf:resource="http://localhost/fuseki/dspace/sparql"/>
    <dc:format>application/pdf</dc:format>
    <dspace:hasBitstream rdf:resource="https://kops.uni-konstanz.de/bitstream/123456789/12189/1/03-02.pdf"/>
    <dcterms:abstract xml:lang="eng">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.</dcterms:abstract>
    <dc:rights>terms-of-use</dc:rights>
    <foaf:homepage rdf:resource="http://localhost:8080/"/>
    <dc:contributor>Fabel, Oliver</dc:contributor>
    <dcterms:issued>2003</dcterms:issued>
    <bibo:uri rdf:resource="http://kops.uni-konstanz.de/handle/123456789/12189"/>
    <dc:creator>Fabel, Oliver</dc:creator>
    <dcterms:hasPart rdf:resource="https://kops.uni-konstanz.de/bitstream/123456789/12189/1/03-02.pdf"/>
    <dspace:isPartOfCollection rdf:resource="https://kops.uni-konstanz.de/server/rdf/resource/123456789/46"/>
  </rdf:Description>
</rdf:RDF>