In the formative stages of their businesses, entrepreneurs have to provide incentives for employees to protect, rather than steal, the source of organizational rents. We study how the entrepreneur's response to this problem determines the organization's internal structure, growth, and its...

We attempt to identify and explain the broad patterns of financial development in developed countries over the twentieth century. We find that, contrary to the predictions of most existing theories, indicators of financial development do not seem monotonic over time. In particular, we find that...

Transactions take place in the firm rather than in the market because the firm offers power to agents who make specific investments. Past literature emphasizes the allocation of ownership as the primary mechanism by which the firm does this. Within the contractibility assumptions of this...

Why is underdevelopment so persistent? One explanation is that poor countries do not have institutions that can support growth. Because institutions (both good and bad) are persistent, underdevelopment is persistent. An alternative view is that underdevelopment comes from poor education. Neither...

As a result of the Asian crisis, relationship-based economic systems are now under attack for corruption and inefficiency. Yet, until recently, they were held up as an alternative (and in some respects superior) form of capitalism to the arm's-length, market-based, Anglo-Saxon systems of the...

How does the development of the financial sector affect industrial growth? What effect does it have on the composition of industry, and the size distribution of firms? What is the relative importance of financial institutions and financial markets, and does it depend on the stage of economic...