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Value Oriented Organizations with Value Neutral Hierarchies

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  • Echeverría, Manuel

    ()
    (Department of Economics, Lund University)

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    Abstract

    This paper gives a game-theoretical treatment of the institutional homogenization of value-oriented firms. It explains why intrinsically motivated, value-oriented firms like non-profits may become similar to for-profit firms in terms of organization and norms. It highlights and explains the pairs: value-oriented and flat organizations in contrast to value-neutral managers and hierarchical organizations. We consider a major donor like the government who delegates a project to an organization without endowments under asymmetric information. The non-profit is able to adapt its organization by establishing a hierarchy with an intrinsically motivated manager. The donor can in turn react by employing institutions in order to cope with information asymmetries regarding the mission of the organization and the unverifiable values of the manager. Two main cases are examined, one without competition and a competitive case. The equilibrium in the first case is a flat organization or alternatively highly altruistic hierarchy. The second competitive case is characterized by a value neutral hierarchy.

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    File URL: http://project.nek.lu.se/publications/workpap/papers/WP12_25.pdf
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    Bibliographic Info

    Paper provided by Lund University, Department of Economics in its series Working Papers with number 2012:25.

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    Length: 34 pages
    Date of creation: 27 Sep 2012
    Date of revision:
    Handle: RePEc:hhs:lunewp:2012_025

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    Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
    Phone: +46 +46 222 0000
    Fax: +46 +46 2224613
    Web page: http://www.nek.lu.se/en
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    Related research

    Keywords: Institutional change; Governance; Nonprofit; Hierarchy; Culture;

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    1. Josse Delfgaauw & Robert Dur, 2008. "Managerial Talent, Motivation, and Self-Selection into Public Management," CESifo Working Paper Series 2437, CESifo Group Munich.
    2. Paul Gregg & Paul A. Grout & Anita Ratcliffe & Sarah Smith & Frank Windmeijer, 2008. "How important is pro-social behaviour in the delivery of public services?," The Centre for Market and Public Organisation 08/197, Department of Economics, University of Bristol, UK.
    3. Van den Steen, Eric, 2005. "On the Origin of Shared Beliefs (and Corporate Culture)," Working papers 27855, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    4. Erik Canton, 2005. "Power of Incentives in Public Organizations When Employees Are Intrinsically Motivated," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(4), pages 664-, December.
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