Fuchs, William and Garicano, Luis (2011) Matching problems with expertise in firms and markets. Journal of the European Economic Association, 8 (2-3). pp. 354-364. ISSN 1542-4774
When should expertise be shared in markets and when in firms? Knowledge exchanges in the market involve less information about the quality of the provider's expertise, but facilitate good utilization of experts' knowledge. In a firm, management holds soft information about individuals' expertise and thus improves on the matching of experts to problems; however, the usage of experts is not smooth and thus firms experience over- or underutilization of experts' time. Thus the trade-off between firms and markets is between utilization (the market allows for better, smoother, utilization of knowledge than firms) and the quality of matching between problems and problem solvers (the market provides less information about experts' quality).
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