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Power in Profit-Maximizing Organizations

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  • Rotemberg, Julio J

Abstract

I study how profit-maximizing organizations make decisions. Members of organizations tend to have incompatible preferences over decisions, but willingness to pay for decisions plays a very limited role in actual decision making. A sizable empirical literature documents that people who provide critical services, are hard to replace, or deal effectively with external shocks, are powerful; they have disproportionate influence over decisions. This can be profit maximizing because the right to shape the firm through its decisions renders the firm more attractive as an employer. Thus, the relative costliness of employees' departures should affect their relative power. Copyright 1993 by MIT Press.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 2 (1993)
Issue (Month): 2 (Summer)
Pages: 165-98

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Handle: RePEc:bla:jemstr:v:2:y:1993:i:2:p:165-98

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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

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Cited by:
  1. Samuel Bowles & Herbert Gintis, 2007. "Power," UMASS Amherst Economics Working Papers 2007-03, University of Massachusetts Amherst, Department of Economics.
  2. Raghuram G. Rajan & Luigi Zingales, 1995. "The Tyranny of Inequality," NBER Working Papers 5396, National Bureau of Economic Research, Inc.
  3. Raghuram Rajan & Henry Servaes & Luigi Zingales, . "The Cost of Diversity: The Diversification Discount and Inefficient Investment," CRSP working papers 463, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  4. David S. Scharfstein & Jeremy C. Stein, 2000. "The Dark Side of Internal Capital Markets: Divisional Rent-Seeking and Inefficient Investment," Journal of Finance, American Finance Association, vol. 55(6), pages 2537-2564, December.
  5. Raghuram G. Rajan & Luigi Zingales, 2000. "The Governance of the New Enterprise," NBER Working Papers 7958, National Bureau of Economic Research, Inc.

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