The internal organization of the firm, transaction costs, and macroeconomic growth

This article analyzes the links between the internal organization of the fi rm and macroeconomic growth. We present a Schumpeterian growth model in whi ch firms face agency costs due to the existence of asymmetries of informati on and the formation of vertical collusions inside those firms. To respond to the threat of collusion, optimal collusion-proof incentive contracts dep end on the efficiency of collusive side contracting within organizations. C ollusion affects therefore the firms' profitability, the incentives to inno vate, and, finally, the stationary equilibrium growth rate of the economy. On the other hand, when the growth rate is small, the prospects of long-ter m relationships within firms increase the agents' incentives to invest in a better collusive technology. We then discuss the two-way relationships bet ween the structure of internal transaction costs, organizational technologi es, and macroeconomic growth.