Firm-Specificity of Asset, Managerial Capability, and Labor Market Competition

46 Pages Posted: 3 Oct 2019

See all articles by Hodaka Morita

Hodaka Morita

Hitotsubashi University - Institute of Economic Research

Cheng-Tao Tang

International University of Japan

Date Written: September 27, 2019

Abstract

We develop a model that captures the link between specificity of a firm’s asset and capability of the firm’s top management, two important sources of profitability. It contributes to strands of economics and management literature by proposing a logic through which firm-specificity and heterogeneity are determined endogenously through labor market competition. Higher importance of managerial capability raises labor mobility, which reduces firm-specificity of asset and human capital, and firm size, whereas higher importance of asset specificity yields opposite effects. We discuss how our model results can enrich a prediction of transaction cost economics on the relationship between uncertainty and governance structure. Also, we discuss implications of our model in the contexts of cross-stage comparisons within an industry’s life-cycle and cross-country differences.

Keywords: Asset Specificity, Managerial Capability, Firm Size, Labor Turnover

JEL Classification: J24, J30, L13

Suggested Citation

Morita, Hodaka and Tang, Cheng-Tao, Firm-Specificity of Asset, Managerial Capability, and Labor Market Competition (September 27, 2019). Available at SSRN: https://ssrn.com/abstract=3460459 or http://dx.doi.org/10.2139/ssrn.3460459

Hodaka Morita

Hitotsubashi University - Institute of Economic Research ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8306
Japan

Cheng-Tao Tang (Contact Author)

International University of Japan ( email )

777 Kokusai-Cho
Minami Uonuma Shi, Niigata-ken 949-7277
Japan
+81 25-779-1508 (Phone)

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