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The Internal Organization of the Firm, Transaction Costs and Macroeconomic Growth

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  • Martimort, D.
  • Verdier, T.

Abstract

This paper proposes an analysis of the links between the internal organization of firms and macroeconomic growth. We present a Schumpeterian growth model in which firms face agency costs. These agency costs are due to the existence of asymmetries of information and the formation of internal vertical collusions. As a response to the opportunity of internal collusion, optimal incentive contracts depend on the efficiency of collusive side contracting within organizations. This un turn affects the firms profitability and the return to innovation and the stationary equilibrium growth rate of the economy. We then discuss the relationships between the structure of internal transaction costs, organizational technologies and macroeconomic growth.

Suggested Citation

  • Martimort, D. & Verdier, T., 1999. "The Internal Organization of the Firm, Transaction Costs and Macroeconomic Growth," DELTA Working Papers 1999-08, DELTA (Ecole normale supérieure).
    • Handle: RePEc:del:abcdef:1999-08
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    Cited by:

    1. Magnus Henrekson & Dan Johansson & Johan Karlsson, 2024. "To Be or Not to Be: The Entrepreneur in Neo-Schumpeterian Growth Theory," Entrepreneurship Theory and Practice, , vol. 48(1), pages 104-140, January.
    2. Francois, P. & Lloyd-Ellis, H., 2003. "Co-movement, Capital and Contracts : 'Normal' Cycles Through Creative Destruction," Discussion Paper 2003-62, Tilburg University, Center for Economic Research.
    3. David Martimort & Thierry Verdier, 2004. "The Agency Cost of Internal Collusion and Schumpeterian Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(4), pages 1119-1141.
    4. Hiller, Victor, 2018. "Self-control and the rise and fall of factory discipline," Journal of Development Economics, Elsevier, vol. 133(C), pages 187-200.
    5. Daron Acemoglu & Pol Antràs & Elhanan Helpman, 2007. "Contracts and Technology Adoption," American Economic Review, American Economic Association, vol. 97(3), pages 916-943, June.
    6. Ottaviano, Gianmarco, 2007. "Contract Enforcement, Comparative Advantage and Long-Run Growth," CEPR Discussion Papers 6419, C.E.P.R. Discussion Papers.
    7. David Martimort & Thierry Verdier, 2003. "From Inside The Firm to the Growth Process," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 621-629, 04/05.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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