Ibid p 27 in other words the firm becomes a nexus of

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Unformatted text preview: d create a system in which: instead of facing perfectly competitive markets for factors of production—labour, capital, and intermediate products—the firm is related to other agents—the worker, the investor, and the supplier—through long-term relational contracting, and agents on both sides of various relationships reciprocate economic benefits on a long-term basis. (ibid., p. 27) In other words, the firm becomes a ‘nexus of treaties’. In the field of resource management, a system of seniority wages and promotions based on the outcome of rank tournaments provides incentives for workers to invest in firm-specific learning and to exert effort.14 This internal labour system is also supported by an underdeveloped external labour market which reduces the possibilities for able workers to leave early. This kind of labour system is closely linked to the team-based production method which Aoki (1988) claims gives Japanese firms strength in the horizontal exchange of information, rather than the vertical exchange of...
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This note was uploaded on 02/03/2014 for the course ECON 204 taught by Professor Devero during the Summer '13 term at American University of Sharjah.

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