Research Summary
Research Summary
Economics of Organization and Firm Performance
Description
A great deal of theoretical and empirical research indicates that economic actors should organize activities so as to minimize the 'transaction costs' associated with managing these activities. But little is known about the consequences of violating this prescription. In this stream of research, Silverman evaluates the performance consequences of using inappropriate organization forms to manage activities, finding that 'misaligned' firms suffer lower profitability and higher failure rates than better aligned firms. Silverman then considers why, in the face of such performance consequences, a firm would persist in remaining misaligned, and finds evidence that although firms systematically try to reduce their misalignment, adjustment costs constrain the rate at which they can do so. Much of this research is in collaboration with Jack A. Nickerson (Washington University, St. Louis) and John Freeman (UC-Berkeley).