The Dynamic Value of Hierarchy
AbstractThis study develops a dual-routines view of the dynamic value of hierarchy, and tests it against the implicit null hypothesis that hierarchy merely provides static advantages over markets. The view holds that hierarchical managers perform two roles that create value for firms in perpetuity---an administrative role of enforcing operational routine, and an entrepreneurial role of executing a metaroutine that continually revises operational routine to keep pace with changes in the environment. The test consists of a natural experiment comparing the behavior and performance of establishments that leave a franchise, "lose their hierarchical managers," with those that remain. I find support for the view. In the absence of the franchisor, establishment behavior drifts from the operational routine, and establishments fail to adopt innovation. Both responses lead to significant decay in performance. Thus hierarchical managers are necessary to actively enforce routine, even after the routine been assimilated, and to introduce innovation, even in this unique setting of perfect incentives.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 47 (2001)
Issue (Month): 3 (March)
Routines; Franchise; Managerial Value;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Gunday, Gurhan & Ulusoy, Gunduz & Kilic, Kemal & Alpkan, Lutfihak, 2011. "Effects of innovation types on firm performance," International Journal of Production Economics, Elsevier, vol. 133(2), pages 662-676, October.
- Szulanski, Gabriel & Jensen, Robert J., 2008. "Growing through copying: The negative consequences of innovation on franchise network growth," Research Policy, Elsevier, vol. 37(10), pages 1732-1741, December.
- Kocher, Martin G. & Pogrebna, Ganna & Sutter, Matthias, 2013. "Other-regarding preferences and management styles," Journal of Economic Behavior & Organization, Elsevier, vol. 88(C), pages 109-132.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If references are entirely missing, you can add them using this form.