This paper investigates the role of the market for knowledge in shaping firm hierarchy—that is, the span of control and the number of layers. We predict that, the larger the extent of the market for knowledge, the larger the span of control and the fewer the layers. We test our predictions...

We consider an entrepreneur that is the sole producer of a cost reducing skill, but the entrepreneur that hires a team to use the skill cannot prevent collusive trade for the innovation-related knowledge between employees and competitors. We show that there are two types of diffusion-avoiding...

We build on the imperfection of intellectual property rights as the central motivation for the organization of firms. There are several characteristics specific to a theory of the firm grounded on the absence of intellectual property rights: monetary incentive schemes arise naturally as a...