Governing the human capitalists : ownership and authority in the advertising and airline industries

Theorists suggest the rising value of human capital will mean greater participation by employees in the ownership and governance of firms. This thesis explores aspects of these claims by analyzing the competitive effects of the allocation of ownership and authority in ad agencies and airlines. Essays 1 and 2 analyze the organizational history of the advertising industry to reconcile the stylized, theoretical views of professional service firms (PSFs) as unstable, small, private partnerships with the empirical reality of large public corporations in several professional service industries. Essay 1 uses a panel of advertising agencies and creativity awards from 1960-1980 to assess whether public ownership reduced PSF competitiveness, particularly whether it diluted employee incentives. Finding no difference in the survival, growth, and award rates of public and private ad agencies, this paper challenges the notion that allocating ownership exclusively to employees provides advantage in the PSF environment. Essay 2 draws on interviews and historical research to develop hypotheses about the structure and evolution of the industry. It proposes that agency size affects the ability to service large projects, hence the size distribution of agencies stems from heterogeneity in the units of demand. It also proposes that the industry's holding companies add value through financial intermediation. Together these essays suggest that the large public corporation is a feasible and perhaps advantaged governance form even in environments based predominantly on human capital.

Department dc:contributor.department

Massachusetts Institute of Technology. Operations Research Center.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2004

Author dc:creator

• Von Nordenflycht, Andrew Gustaf, 1969-

Advisor dc:contributor.advisor

• Rebecca M. Henderson, Robert S. Gibbons and Thomas A. Kochan.

• Operations Research Center.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/17723

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/17723