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Capitalists and workers: knowledge and the strategic role of investment within the firm

Capitalists and workers: knowledge and the strategic role of investment within the firm
Capitalists and workers: knowledge and the strategic role of investment within the firm
Does the ownership of capital confer a strategic advantage within the firm? The formation of a firm frequently represents an attempt by an individual to secure a return on knowledge, and we demonstrate that, in this context, there can be an incentive to precommit capital before contracting with other members of the firm - that is, to be the ‘capitalist’. Results are also obtained on the investment level and wage rate. The key ingredient of the model is emergence of a product market entry threat from within the firm. This contrasts with the anonymous external potential entrant prevalent in the literature.
capitalist, entrepreneur, knowledge, strategic investment
0014-2921
1779-1797
Stewart, Geoff
a94573f3-bb92-416f-ba18-3c6272224d18
Stewart, Geoff
a94573f3-bb92-416f-ba18-3c6272224d18

Stewart, Geoff (1994) Capitalists and workers: knowledge and the strategic role of investment within the firm. European Economic Review, 38 (9), 1779-1797. (doi:10.1016/0014-2921(94)90050-7).

Record type: Article

Abstract

Does the ownership of capital confer a strategic advantage within the firm? The formation of a firm frequently represents an attempt by an individual to secure a return on knowledge, and we demonstrate that, in this context, there can be an incentive to precommit capital before contracting with other members of the firm - that is, to be the ‘capitalist’. Results are also obtained on the investment level and wage rate. The key ingredient of the model is emergence of a product market entry threat from within the firm. This contrasts with the anonymous external potential entrant prevalent in the literature.

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Published date: December 1994
Keywords: capitalist, entrepreneur, knowledge, strategic investment

Identifiers

Local EPrints ID: 33035
URI: http://eprints.soton.ac.uk/id/eprint/33035
DOI: doi:10.1016/0014-2921(94)90050-7
ISSN: 0014-2921
PURE UUID: cf8b76d8-0a3d-45f7-978d-4f9f01fd5e64

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Date deposited: 12 Dec 2007
Last modified: 15 Mar 2024 07:41

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Author: Geoff Stewart

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