Organizational economics.

• Position: Conferences - Economic analysis of financial derivatives

The NBER's Working Group on Organizational Economics, directed by Robert Gibbons of MIT, met in Cambridge on December 12 and 13. This Working Group studies governed transactions (that is, those that do not occur in frictionless markets). Naturally, the group's main focus is on transactions within firms. As a result, many of the group's members are drawn from other NBER Programs and Working Groups--such as Corporate Finance, Personnel Economics, and Productivity--that study resource allocation and other processes within firms. The group is also pursuing a significant interest in governed transactions between firms, including contracts, hybrid governance structures (for example, alliances, joint ventures, networks, and so on), and activities that change firms' boundaries (for example, startups, spin-offs, mergers, and so on). As a result, some of the group's members come from these NBER Programs and Working Groups: Entrepreneurship, Industrial Organization, and International Trade and Organization Finally, many of the principles that apply to governed transactions within and between firms also apply to other kinds of organizations and institutions, so the group is also pursuing a subsidiary interest in organizations such as schools, hospitals, government agencies, and beyond. The group was formed in Fall 2002. So far, they have convened annually for a two-day meeting involving about 15 papers, with comments by discussants.

The December conference program was:

Nicolae Garleanu, University of Pennsylvania, and Jeffrey Zwiebel, Stanford University, "Design and Renegotiation of Debt Covenants" Birger Wernerfelt, MIT, "Governance of Adjustments" Joshua Lerner, NBER and Harvard University, and Ulrike Malmendier, Stanford University, "Contractibility and Contract Design in Strategic Alliances" Discussants: George Baker, NBER and Harvard University, and Rebecca Henderson, NBER and MIT

Edward Lazear, NBER and Stanford University, "Entrepreneurship" Thomas Hellman, Stanford University, "When Do Employees become Entrepreneurship?" Discussant: Fiona Scott Morton, NBER and Yale University

Pol Antras and Elhanan Helpman, NBER and Harvard University, "Global Sourcing" Daron Acemoglu, NBER and MIT; Philippe Aghion, NBER and Harvard University; Rachel Griffith, Institute for Fiscal Studies; and Fabrizio Zilibotti, Stockholm University, "Vertical Integration and Technology: Theory and Evidence" Discussant: Robert Gertner, NBER and University of Chicago

Marianne Bertrand, NBER and University of Chicago, and Sendhil Mullainathan, NBER and MIT, "Cash Flow and Investment Project Outcomes: Evidence from Bidding on Oil and Gas Leases" Marianne Bertrand; Antoinette Schoar, NBER and MIT; and David Thesmar, ENSAE-CREST, "Banking Deregulation and Industry Structure: Evidence from the French Banking Reforms of 1985" Oguzhan Ozbas, University of Southern California, "Integration, Organizational Process, and Allocation of Resources" Discussants: Jeremy Stein, NBER and Harvard University, and Steve Tadelis, Stanford University

Benjamin E. Hermalin, University of California, Berkeley, "Trends in Corporate Governance" Kevin J. Murphy and Jan Zabojnik, University of Southern California, "Managerial Capital and the Market for CEOs" Discussant: Nancy Beaulien, NBER and Harvard University

Colin Camerer, California Institute of Technology; and Roberto Weber and Scott Rick, Carnegie Mellon University, "Organizational Codes in the Lab" Jacques Cremer, Universite des Sciences Sociales de Toulouse; Luis Garicano, University of Chicago; and Andrea Prat, London School of Economics, "Codes in Organizations" Discussant: John Roberts, Stanford University

Garleanu and Zwiebel analyze the design and renegotiation of covenants in debt contracts as a particular example of the contractual assignment of property" rights under asymmetric information. In particular, they consider a setting in which furore firm investments are efficient in some states, but also involve a transfer from the lender(s) to shareholders. While there is symmetric information regarding investment efficiency...