Incentives, Reputation and the Allocation of Authority

We address the question how much authority a principal should delegate to a manager with conflicting interests and uncertain ability in a context in which the manager has both compensation-based and reputational incentives. The optimal level of authority balances the value of the manager's decision-making expertise against the cost of ensuring that the manager uses his discretion productively. Reputational incentives reduce the necessary monetary incentives to discourage purely opportunistic behavior, but may cause the manager to pursue conservative courses of action to preserve his reputation. This undermines the benefits of delegating control, leading to decreased managerial authority and stronger monetary incentives. When the principal can commit to long-term contracts, she eliminates this conservative bias by rewarding a successful manager with greater future compensation and authority than would be optimal in a static setting. Early in the relationship the principal may delegate additional authority in order to screen for managers of high ability.agency problems, delegation, compensation contracts, job design, career concerns, managerial conservatism

California Dreaming? Cross-Cluster Embeddedness and the Systematic Non-Emergence of the 'Next Silicon Valley'

The importance of social embeddedness in economic activity is now widely accepted. Embeddedness has been shown to be particularly significant in explaining the trajectory of regional development. Nonetheless, most studies of embeddeddness and its impacts have treated each locale as an independent unit. Following recent calls for the study of cross-cluster social interactions, we look at the consistent failure of numerous localities in the United States with high potential to emulate Silicon Valley and achieve sustained success in the ICT industry. The paper contends that the answer lies in high-technology clusters being part of a larger system. Therefore, we must include in our analysis of their social structure the influence of cross-cluster embeddedness of firms and entrepreneurs. These cross-clusters dynamics lead to self-reinforcing social fragmentation in the aspiring clusters and, in time, to the creation of an industrial system in the United States based on stable dominant and subordinate (feeder) clusters. The paper expands theories of industrial clusters, focusing on social capital, networks, and embeddedness arguments, to explain a world with one predominant cluster region. It utilizes a multimethod analysis of the ICT industry centered in Atlanta, Georgia, as an empirical example to elaborate and hone these theoretical arguments.

Information and Communication Technologies and Skill Upgrading: the Role of Internal vs External Labour Markets

Following the adoption of information and communication technologies (ICT), firms are likely to face increasing skill requirements. They may react either by training or hiring the new skills, or by a combination of both. We first show that ICT are indeed skill biased and we then assess the relative importance of external and internal labour market strategies. We show that skill upgrading following ICT adoption takes place mostly through internal labour markets adjustments. The introduction of ICT is associated with an upward shift in firms' occupational structure, of which one third is due to hiring and firing workers from and to the external labour market, whereas two-thirds are due to promotions. Moreover, we find no compelling evidence of external labour market strategies based on "excess turnover". In contrast, French firms heavily rely on training in order to upgrade the skill level of their workforce, even if this varies across industries.Technical change, labour turnover, skill bias, training, internal labour markets

Information and Communication Technologies and Skill Upgrading: The Role of Internal vs. External Labour Markets

Following the adoption of information and communication technologies (ICT), firms are likely to face increasing skill requirements. They may react either by training or hiring the new skills, or by a combination of both. We first show that ICT are indeed skill biased and we then assess the relative importance of external and internal labour market strategies. We show that skill upgrading following ICT adoption takes place mostly through internal labour markets adjustments. The introduction of ICT is associated with an upward shift in firms’ occupational structure, of which one third is due to hiring and firing workers from and to the external labour market, whereas two-thirds are due to promotions. Moreover, we find no compelling evidence of external labour market strategies based on "excess turnover". In contrast, French firms heavily rely on training in order to upgrade the skill level of their workforce, even if this varies across industries.skill bias, technical change, internal labour markets, labour turnover, training

Single-sex schools and science engagement

This paper considers whether single-sex schooling affects gendered patterns in the uptake of science courses in year 11 and the development of science-related career paths. In particular, the author is interested in exploring gender differences surrounding the life and physical sciences. The author explores these issues using data from the Longitudinal Surveys of Australian Youth. Differences in the uptake of life and physical science subjects by males and females occur across all schools. In girls-only schools girls are more likely to undertake physical science subjects than their female counterparts in co-educational schools, but there is no difference when it comes to planning a physical science career. On the other hand, boys in boys-only schools are no more likely to take up life science subjects than their male counterparts in co-educational schools, but they are more likely to plan life science careers

Bureaucratic minimal squawk behaviour: theory and evidence from US regulatory policy

Regulators appointed on finite contracts have an incentive to signal their worth to the job market. This paper shows that, if contracts are sufficiently short, this can result in ‘minimal squawk’ behaviour. That is, regulated firms publicise the quality of unfavourable decisions, aware that regulators then set favourable policies more often to keep their professional reputation intact. Terms of office vary across US states, prompting an empirical test using firm-level data from the regulation of the US electric industry. Consistent with the theory, we find that shorter terms are associated with fewer rate of return reviews and higher residential electricity prices

Fundamental Rights of workers in the Digital Age: A methodological approach from a case study. WP C.S.D.L.E. "Massimo D'Antona" .INT - 89/2011

The relationship between employer and worker is not only obligatory but above all, as Sinzheimer said, a ‘relationship of power’. In the Digital Age this statement is confirmed by the massive introduction of ICT in most of the companies that increase, in practice, employer’s supervisory powers. This is a worrying issue for two reasons: on one hand, ICT emerge as a new way to weaken the effectiveness of fundamental rights and the right to dignity of workers; and, on the other hand, Spanish legal system does not offer appropriate solutions to ensure that efficacy. Moreover, in a scenario characterized by a hybridization of legal systems models –in which traditional hard law methods are combined with soft law and self regulation instruments–, the role of our case law has become very important in this issue. Nevertheless, despite the increase of judicialization undergone, solutions offered by Courts are so different that do not give enough legal certainty. Facing this situation, I suggest a methodological approach –using Alchourron and Bulygin’s normative systems theory and Alexy’s fundamental rights theory– which can open new spaces of decision to legal operators in order to solve properly these problems. This proposal can allow setting a policy that guarantees fundamental rights of workers, deepening their human freedom in companies from the Esping-Andersen’s de-commodification perspective. With this purpose, I examine electronic communications in the company as a case study

WP 29 - Overcoming marginalisation? Gender and ethnic segregation in the Dutch construction, health, IT and printing industries

It is common knowledge that indigenous men generally have a better position in the labour market than women and ethnic minorities. This study deals with the question why this is the case in certain sectors of the Dutch economy. The text discusses the labour market attainment for women and ethnic minorities in economic sectors where they are underrepresented. In each of the sectors construction, IT and printing we have evaluated five hypotheses regarding the opportunities of access into and promotion within labour markets for the particular occupations of carpenters, software engineers and printers. We have selected the health sector and the occupation of nurses, as a contrasting sector where women outnumber men in absolute terms. Our hypotheses deal with the following issues: education and training; wage-setting; recruitment and selection; social benefits and active labour market policies. The study arrives at a conclusion about the differences in the factors explaining gender and ethnic segregation. The study is based on a literature overview, interviews with key informants and small case studies in 48 enterprises and organisations. This report includes the national overview for The Netherlands of the research project ‘Overcoming marginalisation’ that was funded under the fifth Framework by the European Commission. The research was executed simultaneously in Denmark, Germany, Italy, Spain and the UK. The international comparison and our comparative working paper on good practice examples will be published separately.