| 1. |
- Horn, Henrik, et al.
(author)
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Competition, Long Run Contracts, and Internal Inefficiencies in Firms
- 1991
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Reports (other academic/artistic)abstract
- Internal reward structures in firms are often integral parts of their "culture", and are changed infrequently in comparision to decisions about e.g., output prices. This paper investigates how this feature of firm organization provides a mechanism through which product market competition affects firm's internal efficiency. The design of firms' internal organization is modeled as a choice of an incentive structure between a principal and an agent, with strategic implications for firm's competitive positions on the product market. It is shown that - contrary to popular beliefs - there is a negative relation between the competitiveness of the product market and effort incentives.
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| 2. |
- Horn, Henrik, et al.
(author)
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Managerial Effort Incentives, X-Inefficiency and International Trade
- 1991
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Reports (other academic/artistic)abstract
- The paper investigates formally the old idea that competition brought about by international trade yields welfare gains by reducing internal slack - "X-inefficiency" - in firms. The paper employs a contract-theoretic based, general equilibrium, trade model to demonstrate how international trade affects the contractual relationship in firms so as to induce more managerial effort supply. This increased effort supply is shown to be beneficial from a welfare perspective, partly because firms are X-inefficient. But, while these results partly confirm the economic "folklore", the folklore can be questioned on other grounds.
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| 3. |
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