Resource title

Career concerns and the acquisition of firm-specific skills

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Resource description

This paper studies compensation schemes which can motivate a manager to acquire firm-specific skills, when the acquisition process is also one of learning about managerial talent. The context is a two-period employment relationship with promotion. In the first period, the manager may expend effort into collecting firm-specific skills. More efforts increases the firm's rent from promoting the manager in the second period. However, increased effort also triggers nonverifiable events which bring more information about manager's talent. It is shown that in this setting first-best firm-specific skills collection by the manager cannot be achieved. It is argued that appropriate sharing of the manager's cost of effort can alleviate this kind of behavior

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en

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application/pdf

Resource resource URL

http://flora.insead.edu/fichiersti_wp/Inseadwp1993/93-61.pdf

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Copyright INSEAD. All rights reserved