Coordination under the Shadow of Career Concerns

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Coordination under the Shadow of Career ConcernsAlexander K. Koch Albrecht Morgenstern The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. To innovate, employees need to develop novel ideas and coordinate with each other to turn these ideas into better products and services. Work outcomes provide signals about employees' abilities to the labor market, and therefore career concerns arise. These can both be 'good' (enhancing incentives for effort in developing ideas) and 'bad' (preventing voluntary coordination). Our model shows how the firm designs its explicit incentive system and organizes work processes to take these conflicting forces into account. The comparative statics results suggest a link between the increased use of teams and recent changes in labor market returns to skills.JEL Classification: D86, J30, L14, L20, M12, O30

On the Incentive Effect of Job Rotation

“…First, it refers to models on implicit incentives in the presence of career concerns, originating from the seminal work of Fama (1980) and Holmström (1999), who offer explanations for the limitations on explicit payment structures. This work is mostly connected to models that study the influence of career concerns on organizational decisions (Dewatripont, Jewitt, and Tirole (1999b), Bar-Isaac (2007)), as well as the role of information on the strengths of implicit incentives (Dewatripont, Jewitt, and Tirole (1999a), Mukherjee (2008aMukherjee ( , 2010, Koch and Morgenstern (2010), Koch and Peyrache (2011)). Related to our approach, Arya and Mittendorf (2011) analyze the impact of organizational decisions as the choice between aggregated and disaggregated performance measures on the incentives given to workers.…”