SME export consortium. Hidden Information Model Perspective.

ALDERETE MARÍA VERÓNICA

Turku, Finlandia

Workshop; Industrial organization workshop; 2008

Departamento de Economía y Estadística de Abo Akademi University

  • This paper develops a hidden information principal agent model to explain small and medium sized firms’ incentives to cooperate in export consortiums as a special case of networks among firms. We introduce a theoretical setting where the informational asymmetry is post-contractual. The State (principal) can not observe the random realization of the firm (agent)’s disutility from effort. The contract specifies the subsidy and effort levels that result from different announcements of the state by the firm. We show that subsidy payments for export to inter-firm networks are ex-post inefficient as a result of the screening effect, if we assume the presence of member firms with different competitiveness levels. A possible outcome of the model is that it insures that only the most competitive firms would be member of the export consortium.