Power in the Firm and Managerial Career Concerns

Ortega, Jaime

doi:10.1162/105864003321220715

Cited by 32 publications

(11 citation statements)

References 5 publications

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“…One strand considers, in a world without explicit contracts, the implications of career concerns for organizational decisions such as task design (e.g. Dewatripont et al 1999b, Ortega 2003, individual vs. team production (e.g. Jeon 1996, Bar-Isaac 2007, and organizational transparency (e.g.…”

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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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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“…Third, there are parallels to the literature on optimal task assignment (Ricart i Costa (1988), Meyer (1991Meyer ( , 1994, Bernhardt (1995), Ortega (2003), Bar-Isaac and Hörner (2011)). These models concentrate on technological questions related to the optimal task assignment and its implications for learning about agents' abilities, wage levels, promotion decisions, and the associated incentives, including considerations regarding the external labor market.…”

Section: Introductionmentioning

confidence: 99%

“…Eguchi (2005) outlines that job rotation can prevent agents from performing private activities within their regular work, as these become more profitable as tenure increases. Recent literature analyzes informational benefits of job rotation, either related to learning about the productivity of tasks (Arya and Mittendorf (2004)), or about the productivity of employees ( (Meyer, 1994), Ortega (2001), Arya and Mittendorf (2006a,b), Prescott and Townsend (2006), Müller (2011)). Specifically, Arya and Mittendorf (2004) argue that job rotation helps to extract information about the productivity of tasks from employees, as this information can no longer be used against them in the case of rotation.…”

Section: Introductionmentioning

confidence: 99%

“…Specifically, Arya and Mittendorf (2004) argue that job rotation helps to extract information about the productivity of tasks from employees, as this information can no longer be used against them in the case of rotation. In contrast, Ortega (2001) analyzes job rotation as an instrument to learn a few traits about many dimensions of a worker's ability instead of to learn a great deal about only a few dimensions. Arya and Mittendorf (2006a) focus on sorting benefits of job rotation, based on the result that only versatile employees optimally self-select themselves into rotation programs.…”

Section: Introductionmentioning

confidence: 99%

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On the Incentive Effect of Job Rotation

Hakenes

Katolnik

2014

SSRN Journal

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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 University of HannoverFebruary 27, 2014 AbstractThe longer an agent is employed in a job, the more the principal will have learned about his ability through the history of performance. With implicit incentives, influence perceptions and effort incentives decrease over time. Rotating agents to a different job deletes learning effects about ability, creating fresh impetus for effort. However, job rotation also reduces the time horizon, and thus reduces rents from working and also incentives. In this trade-off, we derive conditions for the desirability of job rotation and show how in the presence of career concerns job rotation may emerge endogenously. Finally, our model allows for more general comments on the optimal rotation frequency as well as the preferred organizational design of a firm.Keywords: Job rotation, Implicit incentives, Learning, Specialization JEL-Codes: D83, J24, L23 * We would like to thank Matthias Kräkel, Martin Peitz, Barbara Schöndube-Pirchegger, Jens Robert Schöndube, Christian Lukas, Stefan Wielenberg, and Ian Jewitt for helpful comments. Participants in the 5th Doctoral Meeting of Montpellier, and the XIV. GEABA symposium in Magdeburg also provided helpful suggestions.

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“…Baker et al 1994, Maskin et al 2000, Ortega 2003, the model predicts that some individuals are promoted even though they would produce more if they remained in their previous job. Such a decision hence is not a mistake, but optimal: the promotion allows extracting more effort from the agent than he would be willing to provide for the same earnings in the lower level job.…”

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confidence: 99%

Job Assignments Under Moral Hazard: The Peter Principle Revisited

Koch

Nafziger

2011

SSRN Journal

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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. 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 company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. 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. Terms of use: Documents in 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. The Peter Principle captures two stylized facts about hierarchies: first, promotions often place employees into jobs for which they are less well suited than for that previously held. Second, demotions are extremely rare. Why do organizations not correct 'wrong' promotion decision? This paper shows in a complete contracting setting that a simple trade-off between incentive provision and efficient job assignment may make it optimal to promote some employees to a job at which they produce less than they would at the previous level.JEL Classification: D82, J31, J33, M12

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Power in the Firm and Managerial Career Concerns

Cited by 32 publications

References 5 publications

Coordination under the Shadow of Career Concerns

Coordination under the Shadow of Career Concerns

On the Incentive Effect of Job Rotation

Job Assignments Under Moral Hazard: The Peter Principle Revisited

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