The O-Ring Theory of the Firm

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dc.contributor.authorRauh, Michael Thomas
dc.date.accessioned2025-02-20T15:52:26Z
dc.date.available2025-02-20T15:52:26Z
dc.date.issued2018-02-01
dc.descriptionThis record is for a(n) offprint of an article published in Journal of Economics and Management Strategy on 2018-02-01; the version of record is available at https://doi.org/10.1111/jems.12216.
dc.description.abstractWe develop an O‐ring production function characterized by specialization and division of labor and where shirking or negative shocks can have major adverse consequences. We show that when the principal can monitor individual output, the firm tends be large (potentially larger than first best), with a high degree of specialization and division of labor, weak incentives, and low pay as in traditional nonunion manufacturing. Moral hazard can only limit the size of the firm relative to the first best when the principal can only monitor team output, in which case the firm has the opposite characteristics.
dc.description.versionoffprint
dc.identifier.citationRauh, Michael Thomas. "The O-Ring Theory of the Firm." Journal of Economics and Management Strategy, vol. 27, no. 1, pp. 82-101, 2018-02-01, https://doi.org/10.1111/jems.12216.
dc.identifier.otherBRITE 3611
dc.identifier.urihttps://hdl.handle.net/2022/33271
dc.language.isoen
dc.relation.isversionofhttps://doi.org/10.1111/jems.12216
dc.relation.journalJournal of Economics and Management Strategy
dc.rightsThis work may be protected by copyright unless otherwise stated.
dc.titleThe O-Ring Theory of the Firm

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