Access to Credit, Risk-Taking and Organizational Change
27 Pages Posted: 25 Jan 2006
Date Written: May 2002
This paper analyzes workers' choices to sort in large and small firms. Workers care to realize their ideas as they share the associated benefits with the firm. Small firms being less capitalized are more inclined to realize their workers' risky ideas, but better capitalized firms provide safe jobs and insurance against income risks. When households gain better access to credit, this insurance through the job becomes less desirable. Small firms then gain a competitive edge in attracting creative workers. However, as they take on too much risk, this may reduce average enterprise profitability, increase bankruptcy and spur inefficient organizational changes of large firms.
JEL Classification: L2, G3, J62
Suggested Citation: Suggested Citation