Institutional Inertia

Author/Editor:

Laura Valderrama

Publication Date:

September 1, 2009

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

We study the relative efficiency of outside-owned versus employee-owned firms and analyze implications for institutional change in a context of technological innovation. When decisions are made through majority voting, the vote on technology choice is used to influence the later vote on the sharing rule. We show how this dynamic voting generates a systematic technological bias that is contingent on firm ownership. We provide conditions under which the pivotal voter's political leverage leads the firm to an institutional trap whereby majority voting and inefficient technology choice reinforce each other, leading to institutional inertia.

Series:

Working Paper No. 09/193

Subject:

English

Publication Date:

September 1, 2009

ISBN/ISSN:

9781451873405/1018-5941

Stock No:

WPIEA2009193

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

25

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