Who Volunteers? A Theory of Firms where Agents are Motivated to Work

While effort averse agents provide only minimum effort if not monitored, other agents may be committed to the organizational goal. Our study allows for a continuum of types, representing different degrees of intrinsic work motivation. This results in two different organizational forms, “volunteer organizations” and “companies,” which may also attract less committed employees who require output-dependent incentive contracts to elicit effort. Generally, only organizations with significant likelihood to attract motivated volunteers can survive as volunteer organizations whereas “firms” should result when monitoring costs are moderate and effort is critical to the organization’s success. ∗Max Planck Institute for Research into Economic Systems, Strategic Interaction Group, Kahlaische Strasse 10, 07745 Jena, Germany. email: [email protected], +49 (3641) 686 620 (phone), +49 (3641) 686 623 (fax). †Humboldt-Universität zu Berlin, School of Business and Economics, Institute of Konzernmanagement, Spandauer Str. 1, D-10178 Berlin. email: [email protected], +49 (30) 2093-5641 (phone), +49 (30) 2093-5643 (fax).