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Fighting for Talent: Risk-Taking, Corporate Volatility and Organisation Change

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  • Guido Friebel
  • Mariassunta Giannetti

Abstract

We show that access to finance may affect firms through the labour market. Talented workers want to realise their ideas but also seek insurance against income risk. Large firms default less often than small firms but they investigate more thoroughly and reject more good ideas. With easier access to consumer credit, talented workers become less averse to the income risk of working in small firms. Thus, small firms gain an advantage on the labour market, their profit volatility increases and large firms react by creating spin-offs. Existing and original empirical evidence is consistent with the implications of our theory. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009.

Suggested Citation

  • Guido Friebel & Mariassunta Giannetti, 2009. "Fighting for Talent: Risk-Taking, Corporate Volatility and Organisation Change," Economic Journal, Royal Economic Society, vol. 119(540), pages 1344-1373, October.
    • Handle: RePEc:ecj:econjl:v:119:y:2009:i:540:p:1344-1373
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    2. Oriana Bandiera & Luigi Guiso & Andrea Prat & Raffaella Sadun, 2015. "Matching Firms, Managers, and Incentives," Journal of Labor Economics, University of Chicago Press, vol. 33(3), pages 623-681.
    3. Nathalie Lazaric & Alain Raybaut, 2014. "Do incentive systems spur work motivations of inventors in high-tech firms," Post-Print halshs-00930186, HAL.
    4. Florian Englmaier & Stefan Grimm & Dominik Grothe & David Schindler & Simeon Schudy, 2024. "The Efficacy of Tournaments for Nonroutine Team Tasks," Journal of Labor Economics, University of Chicago Press, vol. 42(4), pages 921-948.
    5. Haufler, Andreas & Norbäck, Pehr-Johan & Persson, Lars, 2014. "Entrepreneurial innovations and taxation," Journal of Public Economics, Elsevier, vol. 113(C), pages 13-31.
    6. Herbold, Daniel & Schumacher, Heiner, 2020. "The agency costs of on-the-job search," Games and Economic Behavior, Elsevier, vol. 121(C), pages 435-452.
    7. Nathalie Lazaric & Alain Raybaut, 2014. "Do incentive systems spur work motivation of inventors in high tech firms? A group-based perspective," Journal of Evolutionary Economics, Springer, vol. 24(1), pages 135-157, January.
    8. Florian Englmaier & Stefan Grimm & Dominik Grothe & David Schindler & Simeon Schudy, 2024. "The Effect of Incentives in Nonroutine Analytical Team Tasks," Journal of Political Economy, University of Chicago Press, vol. 132(8), pages 2695-2747.
    9. Daniel Herbold & Heiner Schumacher, 2020. "Relational retention," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(4), pages 490-502, June.
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