Knowledge as property rights under the ratchet effect of innovation
This paper studies how reduced oversight creates an incentive for process innovation. With incomplete contracts, tight monitoring of workers creates a ratchet effect of innovation. Under reduced oversight, a worker accrues private knowledge about his innovation, which serves as a substitute for its...
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| Format: | Article |
| Language: | English |
| Published: |
2021
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| Subjects: | |
| Online Access: | https://hdl.handle.net/10356/145747 |
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| Institution: | Nanyang Technological University |
| Language: | English |
| Summary: | This paper studies how reduced oversight creates an incentive for process innovation. With incomplete contracts, tight monitoring of workers creates a ratchet effect of innovation. Under reduced oversight, a worker accrues private knowledge about his innovation, which serves as a substitute for its inalienable property rights. The resulting asymmetric information generates an information rent for the worker, which feeds back as an innovation incentive ex ante. A weak early production incentive is required to complement it. Innovations are generally underutilized ex post, and mildly successful innovations are not distinguished from failed innovation attempts. |
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