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Why Less Informed Managers May Be Better Leaders

Author

Listed:
  • Sergei Guriev

    (New Economic School (Moscow))

  • Anton Suvorov

    (New Economic School (Moscow))

Abstract

Unlike the textbook model of a top manager being an omniscient planner, coordinator and monitor, the real life managers suffer from discontinuity, lack of systematic information collection and limited time for analysis and re?ection. Why do not business leaders set up their organizations in the way that would allow themselves to make informed choices based on thorough analysis? We argue that in some situations top managers may benefit from being less informed. In our model, additional information raises ex post flexibility of the decision-makers which may undermine the ex ante incentives of their subordinates to make specific investments. The subordinates expect less informed leaders to be more committed to the original strategy which increases the returns to the strategy-specific investments. We show that this effect is more likely to take place in more predictable environments; we also discuss how this effect depends on the hierarchical structure of the organization.

Suggested Citation

  • Sergei Guriev & Anton Suvorov, 2010. "Why Less Informed Managers May Be Better Leaders," Working Papers w0142, New Economic School (NES).
  • Handle: RePEc:abo:neswpt:w0142
    as

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    References listed on IDEAS

    as
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Are ignorant managers better?
      by Economic Logician in Economic Logic on 2010-06-03 19:33:00

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