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Strategic debt with multi‐task technologies

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  • Alberto Dalmazzo

Abstract

In this paper it is shown that when employees have ex post bargaining power, the entrepreneur will try to avoid technologies that are based on a large number of complementary tasks. We demonstrate that the entrepreneur can shelter profit from the employees’ rent‐seeking behaviour by raising debt. Moreover, the strategic use of debt financing can favour the adoption of technologies that rely on synergies. JEL Classification: G31, J30, L20 Dette stratégique en présence de technologies impliquant plusieurs tâches. Ce mémoire montre que quand les employés ont un pouvoir de négociation ex post, l'entrepreneur va tenter d'éviter les technologies qui sont basées sur un grand nombre de tâches complémentaires. On montre que l'entrepreneur peut protéger ses profits des activités de chasse aux rentes des employés en accroissant sa dette. De plus, l'utilisation stratégique du financement par la dette peut favoriser l'adoption de technologies qui dépendent de synergies.

Suggested Citation

  • Alberto Dalmazzo, 2000. "Strategic debt with multi‐task technologies," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(1), pages 252-270, February.
    • Handle: RePEc:wly:canjec:v:33:y:2000:i:1:p:252-270
    DOI: 10.1111/0008-4085.00014
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    More about this item

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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