Employer moral hazard and wage rigidity. The case of worker owned and investor owned firms

Albanese, Marina; Navarra, Cecilia; Tortia, Ermanno

doi:10.1016/j.irle.2014.08.006

Cited by 15 publications

(19 citation statements)

References 48 publications

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“…In economic agency theory however, primarily scholars who study cooperative firms (e.g. Albanese et al, 2015) are appreciative of a symmetric and holistic perception of opportunism. A recent further exception is Zardkoohi et al (2015) who consider opportunistic short-term oriented behavior of shareholders opposite company CEOs.…”

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confidence: 99%

The Opportunistic Principal

Wagner

2019

Kyklos

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SUMMARY This article sheds light on a surprisingly persistent gap in economic theory: Economists have extensively studied agency relationships between principals and agents, but economic analysis has traditionally been preoccupied with problems created by agents rather than principals. Principal‐agent theory traditionally neglects opportunism on part of the principals. As a result, economic theory fails to fully explain gaps in economic performance. Even worse, the for decades biased concept of opportunism has shaped generations of students in economics and business and thus has contributed to deficient managerial and economic outcomes. Under the presumption that not only agents but also principals demonstrate opportunistic behavior, the economic definition of opportunism as established by Oliver Williamson is further developed. This contribution extends the concept of opportunism to principals. The principal’s illegitimate interference with the autonomy of the agent is discussed which shows that whilst agent opportunism largely rests on information asymmetry, principal opportunism feeds itself off power asymmetries. In an interdisciplinary effort and building on recent research in the area of bullying and mobbing, the economic rationale of principal opportunism is explained with the help of a simple game‐theoretic model. On this basis, it is demonstrated how a more balanced perception of principal agent relationships can contribute to an updated theory of the firm.

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confidence: 99%

The Opportunistic Principal

Wagner

2019

Kyklos

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“…Moreover, our results hold both under the assumption that workers are risk averse and under the assumption that they are risk neutral (as in Shapiro and Stiglitz ), thus challenging – as in Albanese et al. () – the traditional explanation of workers’ preference for fixed wages in IOFs based on risk aversion. This is important, since the prevalence of contractual arrangements entailing wage stickiness and layoffs of workers in periods of low demand (especially in industries whose product demand is uncertain) motivated a literature emphasizing the role that risk‐neutral IOFs play in insuring their risk‐averse employees against undesired labor income fluctuations (Baily , Azariadis ).…”

Section: Relevant Literaturementioning

confidence: 56%

Why Wages Tend to Be Lower in Worker‐owned Firms Than in Investor‐owned Firms

Bonatti

Lorenzetti

2018

Ann Public Coop Econ

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Consistently with the empirical evidence and in contrast with Shapiro and Stiglitz (1984), we demonstrate that worker-owned firms exhibit not only more wage flexibility and less employment volatility than investor-owned firms, but also lower expected wages than the latter. This is due to the informational advantage enjoyed by the firm's owners relatively to the workers concerning some circumstances that affect the performance of the firm. We show this both in the case in which each investor owned firm offers labor contracts to single workers who act atomistically and in the case in which each investor owned firm negotiates labor conditions with its workers who act as a group (a 'union'). Finally, we show that differences in attitudes towards risk between investor owned firms and their workers are not necessary to explain the typical combination of state-independent wages and cyclical layoffs that characterizes most industries.

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“…The third major advantage is that membership in a cooperative helps the vineyard owners to avoid hold-up situations that arise when downstream firms—here profit-maximizing wineries buying the grapes—exercise market power (Albanese, Navarra, and Tortia, 2015). As members of a cooperative, individual grape growers can be assured that they will be paid the ex ante agreed price.…”

Section: The Economic Performance Of Cooperatives: Theoretical Considmentioning

confidence: 99%

What Makes Cooperatives Successful? Identifying the Determinants of Their Organizational Performance

Fanasch

Frick

2018

J Wine Econ

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In comparison with other organizational forms, cooperatives have been found to offer poor product quality and suffer from low reputation. The main reasons discussed in the literature are information asymmetries, which leads to adverse selection and moral hazard, as well as the absence of profit orientation due to poorly specified and diluted property rights. However, although, in reality, many cooperatives indeed perform poorly, and some are apparently able to completely avoid or at least reduce the problems that are considered prototypical for this hybrid organizational form. Therefore, the purpose of this study is to identify the characteristics required to reduce the problems resulting from poorly specified property rights and information asymmetries and, hence, to successfully compete in the market. The data we use to identify the characteristics that separate “good” and “bad” cooperatives encompass 136 organizations in Austria, Germany, and northern Italy. Our logistic regression estimations show that older and larger cooperatives (in terms of acreage) have a significantly higher probability to be listed in at least one of two highly respected wine guides. Moreover, German cooperatives have a significantly lower probability of being listed than either Austrian or northern Italian cooperatives. The findings suggest that differences in performance can be explained by the management of cooperatives. (JEL Classifications: D23, D82, D86, J54, L22, L25, L66, P13, Q13)

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Employer moral hazard and wage rigidity. The case of worker owned and investor owned firms

Cited by 15 publications

References 48 publications

The Opportunistic Principal

The Opportunistic Principal

Why Wages Tend to Be Lower in Worker‐owned Firms Than in Investor‐owned Firms

What Makes Cooperatives Successful? Identifying the Determinants of Their Organizational Performance

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