We model the emergence of organization forms in a game between prospective entrepreneurs. Complementary roles arise endogenously in a way that admits a stable assignment of workers to firms. This contrasts with existing work on job matching, where stability typically requires workers to be substitutes. Our approach demonstrates that the labor market selection of entrepreneurs and their profit-maximizing choices lead to specific technologies in which certain workers are substitutes and others are complements. We give a simple characterization of equilibrium firm memberships and organizations. We show that payoffs in our non-cooperative solution lie in the core of the corresponding cooperative game, and can be obtained in a decentralized process that reduces information and planning requirements for the entrepreneur.

entrepreneurship, firm formation, firm organization, job matching, occupational choice
Bargaining Theory; Matching Theory (jel C78), Auctions (jel D44), Human Capital; Skills; Occupational Choice; Labor Productivity (jel J24), Entrepreneurship (jel L26)
Tinbergen Institute
hdl.handle.net/1765/14740
Tinbergen Institute Discussion Paper Series
Discussion paper / Tinbergen Institute
Tinbergen Institute

Roessler, C, & Koellinger, Ph.D. (2009). Firm Formation with Complementarities: The Role of the Entrepreneur (No. TI 09-003/3). Discussion paper / Tinbergen Institute. Tinbergen Institute. Retrieved from http://hdl.handle.net/1765/14740