Institutional settings and rent appropriation by knowledge-based employees: the case of Major League Baseball

We examine the role of institutional settings in determining rent appropriation by employees. Based on an inductive historical study of owner-player relations in Major League Baseball from the inception of professional baseball to the present, we show that both formal and informal institutional rules can dramatically influence rent appropriation. We draw upon anthropology research on social relations to understand how differences in informal norms regarding the social relations between the owners and the players affect appropriation. Our findings show that when social relations are defined by authority ranking, pay is determined more by fiat than by market forces or bargaining. Copyright © 2008 John Wiley & Sons, Ltd.