Moral hazard and reputational concerns in teams: Implications for organizational choice

Jeon, Seokwon

doi:10.1016/0167-7187(95)00482-3

Cited by 58 publications

(42 citation statements)

References 17 publications

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“…If he receives little power (low r.p A), anything he does has a smaller impact on output than it would have had, had he been given more power. Thus I define power as the degree to which a manager can affect his firm's performance: a manager may lIn two recent papers, Meyer (1994) and Jeon (1996) have used a similar model. However, their focus is on efficient task assignment in a context where there is no managerial effort, whereas I am interested in the relationship between power and incentives.…”

Section: Set-upmentioning

confidence: 99%

Power in the Firm and Managerial Career Concerns

Ortega¹

2003

Journal of Economics &Amp; Management Strategy

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With more power, a manager can make more decisions or more important ones, and in this way have more impact on his firm. As a consequence, firm performance provides more information about the abilities of more powerful managers, who are more "visible". In this paper I analyze how the allocation of power in the firm affects the managers' career concerns when no manager's power can be increased without reducing another manager's. I show that, with a simple linear technology and risk-neutral managers, it is generally optimal to divide power in an unequal way, even though this may create conflicts of interest between managers. I also analyze how optimal pay-forperformance schemes should depend on the allocation of power.

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Section: Set-upmentioning

confidence: 99%

Power in the Firm and Managerial Career Concerns

Ortega¹

2003

Journal of Economics &Amp; Management Strategy

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“…In contrast to Demougin and Siow (1994), I explicitly model the market structure and discuss other aspects of organizational design. Other related articles are Meyer (1994), Jeon (1996), Ortega (2001), andCarrillo (2003). They analyze how to choose task allocation, team composition, and job rotation when the firm needs to learn about the employees' talents to make promotions or efficiently allocate labor.…”

Section: Related Literaturementioning

confidence: 99%

Organizational Form and the Market for Talent

Harstad¹

2007

Journal of Labor Economics

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This article brings together the market for products, the market for talent, and firms' organizational form. While the organizational design determines the allocation of blame and fame within the firm, the value of a good reputation depends on the market structure. Consequently, the market structure dictates the optimal organizational design. If competition becomes tougher and the market thicker, transparent firms decentralize while nontransparent firms concentrate control, transparency itself is improved, corporations switch from unitary to multidivisional form, and the turnover of managers increases. The model rationalizes recent trends in both executive pay and organizational design.

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“…Dewatripont et al 1999b, Ortega 2003, individual vs. team production (e.g. Jeon 1996, Bar-Isaac 2007, and organizational transparency (e.g. Mukherjee 2008).…”

Section: Related Literaturementioning

confidence: 99%

Coordination under the Shadow of Career Concerns

Koch

Morgenstern

2010

The B.E. Journal of Theoretical Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Coordination under the Shadow of Career ConcernsAlexander K. Koch Albrecht Morgenstern The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. To innovate, employees need to develop novel ideas and coordinate with each other to turn these ideas into better products and services. Work outcomes provide signals about employees' abilities to the labor market, and therefore career concerns arise. These can both be 'good' (enhancing incentives for effort in developing ideas) and 'bad' (preventing voluntary coordination). Our model shows how the firm designs its explicit incentive system and organizes work processes to take these conflicting forces into account. The comparative statics results suggest a link between the increased use of teams and recent changes in labor market returns to skills.JEL Classification: D86, J30, L14, L20, M12, O30

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Moral hazard and reputational concerns in teams: Implications for organizational choice

Cited by 58 publications

References 17 publications

Power in the Firm and Managerial Career Concerns

Power in the Firm and Managerial Career Concerns

Organizational Form and the Market for Talent

Coordination under the Shadow of Career Concerns

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