Why Less Informed Managers May Be Better Leaders
AbstractUnlike 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.
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Bibliographic InfoPaper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0142.
Length: 21 pages
Date of creation: Apr 2010
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leadership; commitment; organizational structure;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-08 (All new papers)
- NEP-BEC-2010-05-08 (Business Economics)
- NEP-CBE-2010-05-08 (Cognitive & Behavioural Economics)
- NEP-CTA-2010-05-08 (Contract Theory & Applications)
- NEP-LAB-2010-05-08 (Labour Economics)
- NEP-MIC-2010-05-08 (Microeconomics)
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