Business, Management and Accounting
4 years ago

Entrepreneurs Gain Stronger Bargaining Power, Reshape Compensation Contracts

RePEc: Research Papers in Economics
Compensation and Bargaining with Entrpreneurship as the Outside Option
Erkki Koskela, Rune Stenbacka

Paper Summary

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The article explores how starting a business affects pay agreements between bosses and workers. They negotiate wages and profit sharing, then decide on investments and effort. The base wage goes up when the market for outside funding is competitive, but profit sharing stays the same regardless of market conditions or bargaining power.