Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2006/7: Management of Knowledge Workers

Hans K. Hvide () and Eirik G. Kristiansen ()
Additional contact information
Hans K. Hvide: University of Aberdeen Business School, Postal: University of Aberdeen Business School, Edward Wright Building, Dunbar Street, Old Aberdeen, AB24 3QY, Great Britain
Eirik G. Kristiansen: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Abstract: We study how complementarities and intellectual property rights affect the management of knowledge workers. The main results relay when a firm will wish to sue workers that leave with innovative ideas, and the effects of complementary assets on wages and on worker initiative. We argue that firms strongly protected by property rights may not sue leaving workers in order to motivate effort, while firms weakly protected by complementary assets must sue in order to obtain positive profits. Firms with more complementary assets pay higher wages (and have lower turnover), but such higher pay has a detrimental effect on worker initiative. Our analysis suggests that strengthened property rights protection reduces turnover costs but weakens worker initiative.

Keywords: Entrepreneurship; Innovation; IPP; Litigation; Personnel economics; R&D; Start-ups

JEL-codes: K41; M13; M50; O32

28 pages, August 4, 2006

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