A productive clash of cultures: Injecting economics into leadership research

Abstract

Research on leadership in economics has developed in parallel to the literature in management and psychology and links between the fields have been sparse. Whereas modern leadership scholars mostly focus on transformational and related leadership styles, economists have mainly emphasized the role of contracts, control rights, and incentives. We argue that both fields could profit from enriching their approach with insights from the other field. We review and synthesize the economics literature on leadership in organizations and discuss how leadership scholars in management and psychology can benefit from the detailed understanding of transactional methods that economists have developed.We link the contributions in economics to a broad set of topics including the foundations of leadership, leader emergence, and leader effectiveness. At the same time, we also point out limitations of the economic approach and outline how the integration of leadership research and economics would broaden the scope of future studies.

Team incentives, task assignment, and performance: A field experiment

“…However, by hypothesizing about and collecting detailed data on how leaders assign tasks to employees, we move a step in the direction of the literature on leadership in management and psychology, which allows for a much richer role of leadership than the economics literature (Zehnder et al 2017). In particular, we stress the role of leaders in coordinating employees'complementary actions that jointly determine the team's success.…”

The Mirage of Procedural Justice and the Primacy of Interactional Justice in Organizations

“…As Arrow (2012) famously demonstrated, every ordering mechanism involves trade-offs in terms of satisfying certain social preferences over others. Moreover, in terms of economic efficiency, a market order is not always the best solution due to market failures (Barney and Hesterly 2006;Zehnder et al 2017). Such political discussions on desired ends and technicalities of their means are not the subjects of interests in this paper.…”

The role of leaders in inducing and maintaining cooperation: The CC strategy

“…See, e.g., the large contract theory literature in economics (Laffont and Martimort, 2002;Dewatripont, 2005, Gibbons andRoberts, 2013) that is based on the important premise that basically all economic agents follow material incentives and minimize costs of effort. While this has produced relevant insights (Bolton et al, 2013a;Zehnder et al, 2017), the existence of the second type -the conditional cooperator (CC in the following)…”

“…and field experiments, surveys, statistical methods, quantitative and qualitative theory), also investigating potential complementarities. See, e.g., Antonakis et al (2010), Bolton et al (2013a), Hermalin (2013), and Zehnder et al (2017). The basic organizational set-up I have in mind for analyzing the "problem of cooperation" is the following (see details in the next section).…”