Working Paper Series, Department of Industrial Economics & Strategy, Copenhagen Business School
No 02-8:
Authority and Discretion: Tensions, Credible Delegation, and Implications for New Organizational Forms
Kirsten Foss and Nicolai J. Foss
Abstract: We analyze a key problem in organization theory and
design, namely the potential tension between authority (i.e., the power to
make decisions which guide the decisions of another person) and the
discretion of employees (i.e., the ability of an agent to control resources
including his own human capital). The problem is rooted in the fact that in
organizations, decisions rights are always loaned rather than owned; a
hierarchical superior can always in principle overrule a hierarchical
inferior. We provide an integrative treatment of the tensions that are
involved in the interaction between authority and discretion, and the
motivational problems that may result from this tension. We discuss how
these problems may kept at bay by credible managerial commitments and other
mechanisms. The framework is then applied to an analysis of the governance
choice between traditional hierarchies and new organizational forms,
specifically internal hybrids. Thus, the framework adds to the
understanding of the costs and benefits of alternative organizational
forms.
Keywords: Managerial intervention, credible delegation, new organizational forms, organizational economics.; (follow links to similar papers)
JEL-Codes: L22; L23; M12; (follow links to similar papers)
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