Bhattacharya, Utpal and Ravikumar, B (1997): From Cronies to Professionals: The Evolution of Family Firms.
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We develop a dynamic model where each generation in a family firm can continue operating its inherited production technology or it could hire a professional to do the same. Though the professional is more qualified, his interests are not aligned with the interests of the family. In the context of an overlapping generations framework, we analyze how this tradeoff affects the evolution of the family firm. We find that family firms initially grow in size by accumulating capital and later professionalize their management after reaching a critical size.
|Item Type:||MPRA Paper|
|Original Title:||From Cronies to Professionals: The Evolution of Family Firms|
|Keywords:||Family firms; Cronies; Moral Hazard;|
|Subjects:||D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D86 - Economics of Contract: Theory
|Depositing User:||B Ravikumar|
|Date Deposited:||28. May 2010 12:56|
|Last Modified:||18. Feb 2013 20:28|
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