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Competition and managerial autonomy

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  • Christian A. Ruzzier

Abstract

I formalize and challenge the idea that competition forces managers to make better choices, thus favoring managerial autonomy in decision making. If managers care about keeping their position or avoiding interference, and they can make strategic choices that affect both expected firm profits and their riskiness, even if competition at first pushes the manager towards profit maximization, further increases in competition might lead him to take excessive risks. To curb this possibility, the principal owner optimally reduces the degree of autonomy granted to the manager. Hence, higher levels of managerial autonomy are more likely for intermediate levels of competition.

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  • Christian A. Ruzzier, 2018. "Competition and managerial autonomy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 39(6), pages 733-747, September.
    • Handle: RePEc:wly:mgtdec:v:39:y:2018:i:6:p:733-747
    DOI: 10.1002/mde.2941
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