Cooperation in Knowledge‐Intensive Firms

Abstract

The extent to which a knowledge-intensive …rm should induce cooperation between its employees is analyzed in a model of relational contracting between a …rm (principal) and its employees (two agents). The agents can cooperate by helping each other, i.e. provide e¤ort that increases the performance of their peer without a¤ecting their own performance. We extend the existing literature on agent-cooperation by analyzing the implications of incomplete contracts and agent hold-up. A main result is that if the agents'hold-up power is su¢ ciently high, then it is suboptimal for the principal to implement cooperation, even if helping e¤ort is productive per se. This implies, contrary to many property rights models, that social surplus may su¤er if the investing parties (here the agents) are residual claimants. The model also shows that long-term relationships facilitate cooperation even if the agents cannot monitor or punish each others e¤ort choices.

On Multitasking and Job Design in Relational Contracts*

“…6 This article also fits into the literature on relational incentive contracts and organizational design since Baker et al [2002] and Levin [2003]. 7 Recently, a number of articles have studied relational contracting in multitasking environments (Schmidt and Schnitzer [1995]; Daido [2006]; Kvaløy and Olsen [2008]; Schöttner [2008]; Mukherjee and Vasconcelos [2011]; Ishihara [2017]; Li et al [2018]). Our analysis introduces generalization of the number of the tasks and other parameter values, by which we not only clarify the robustness of the analytical results and the economic interpretation in the literature but also find new results.…”

“…[2002] and Levin [2003]. Recently, a number of articles have studied relational contracting in multitasking environments (Schmidt and Schnitzer [1995]; Daido [2006]; Kvaløy and Olsen [2008]; Schöttner [2008]; Mukherjee and Vasconcelos [2011]; Ishihara [2017]; Li et al . [2018]).…”

“…factor of task bundling when the performance measurement is perfectly aligned with the true performance. Second, Mukherjee and Vasconcelos [2011], as well as other related articles including Besanko et al [2005], Corts [2007], Kvaløy and Olsen [2008], Mukherjee and Vasconcelos [2011] and Ishihara [2017], also consider a job design problem to compare individual-based task assignment to team-based task assignment. Mukherjee and Vasconcelos [2011] investigate a relational contracting model in which the number of working agents and assigned tasks for each agent are fixed, and the mode of job design is either individual assignment, such that the discretionary bonus is contingent only on a single performance measurement, or team assignment, such that the discretionary bonus is contingent on multiple performance measurements.…”

Relational incentive contracts for teams of multitasking agents

“…b < v(1 = a )=K (21) We see that this condition is feasible when 0 < < a It now remains to verify that the condition can hold for the equilibrium bonus b. This bonus must satisfy b 1 2S F , where S F is the …rst-best surplus per agent.…”

“…However, these papers do not consider multiple agents. In this paper we combine and extend Kvaløy and Olsen (2008, 2022 to analyze the more realistic case with multiple agents having multiple tasks.…”