Authority and Discretion: Tensions, Credible Delegation, and Implications for New Organizational Forms
AbstractWe analyze a key problem in organization theory and design, namely the potential tension between authority (i.e., the power to make decisions which guide the decisions of another person) and the discretion of employees (i.e., the ability of an agent to control resources including his own human capital). The problem is rooted in the fact that in organizations, decisions rights are always loaned rather than owned; a hierarchical superior can always in principle overrule a hierarchical inferior. We provide an integrative treatment of the tensions that are involved in the interaction between authority and discretion, and the motivational problems that may result from this tension. We discuss how these problems may kept at bay by credible managerial commitments and other mechanisms. The framework is then applied to an analysis of the governance choice between traditional hierarchies and new organizational forms, specifically internal hybrids. Thus, the framework adds to the understanding of the costs and benefits of alternative organizational forms.
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 InfoPaper provided by Department of Industrial Economics and Strategy, Copenhagen Business School in its series IVS/CBS Working Papers with number 2002-08.
Date of creation:
Date of revision:
Contact details of provider:
Web page: http://www.cbs.dk/forskning_viden/fakulteter_institutter_centre/institutter/oekonomi/ivs/
Managerial intervention; credible delegation; new organizational forms; organizational economics.;
Other versions of this item:
- Kirsten Foss & Nicolai J. Foss, 2002. "Authority and Discretion Tensions, Credible Delegation and Implications for New Organizational Forms," DRUID Working Papers 02-11, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executives; Executive Compensation
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Armstrong, M., 1994.
"Delegation and discretion,"
Discussion Paper Series In Economics And Econometrics
9421, Economics Division, School of Social Sciences, University of Southampton.
- Philippe Aghion & Jean Tirole, 1994.
"Formal and Real Authority in Organizations,"
95-8, Massachusetts Institute of Technology (MIT), Department of Economics.
- Aghion, Philippe & Tirole, Jean, 1994. "Formal and Real Authority in Organizations," IDEI Working Papers 37, Institut d'Économie Industrielle (IDEI), Toulouse.
- Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
- Philippe Aghion & Jean Tirole, 1994. "Normal and Real Authority in Organizations," Working papers 94-13, Massachusetts Institute of Technology (MIT), Department of Economics.
- Dow, Gregory K., 1987. "The function of authority in transaction cost economics," Journal of Economic Behavior & Organization, Elsevier, vol. 8(1), pages 13-38, March.
- Baker, George & Gibbons, Robert & Murphy, Kevin J, 1999. "Informal Authority in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 56-73, April.
- Demski, Joel S, et al, 1999. "Practices for Managing Information Flows within Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 107-31, April.
- Rajan, Raghuram G & Zingales, Luigi, 1998.
"Power in a Theory of the Firm,"
CEPR Discussion Papers
1777, C.E.P.R. Discussion Papers.
- Raghuram G. Rajan & Luigi Zingales, . "Power in a Theory of the Firm," CRSP working papers 335, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Raghuram G. Rajan & Luigi Zingales, 1997. "Power in a Theory of the Firm," NBER Working Papers 6274, National Bureau of Economic Research, Inc.
- Gal-Or, Esther & Amit, Raphael, 1998. "Does empowerment lead to higher quality and profitability?," Journal of Economic Behavior & Organization, Elsevier, vol. 36(4), pages 411-431, September.
- Herbert A. Simon, 1991. "Organizations and Markets," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 25-44, Spring.
- Nicolai J. Foss, 2001. "Selective Intervention and Internal HybridsInterpreting and Learning from the Rise and Decline of the Oticon Spaghetti Organization," DRUID Working Papers 01-16, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
- Michael C. Jensen & William H. Heckling, 1995. "Specific And General Knowledge, And Organizational Structure," Journal of Applied Corporate Finance, Morgan Stanley, vol. 8(2), pages 4-18.
- Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
- Margit Osterloh & Bruno S. Frey, . "Motivation, Knowledge Transfer, and Organizational Form," IEW - Working Papers 027, Institute for Empirical Research in Economics - University of Zurich.
- Sah, Raaj Kumar & Stiglitz, Joseph E, 1985. "Human Fallibility and Economic Organization," American Economic Review, American Economic Association, vol. 75(2), pages 292-97, May.
- Nahum D. Melumad & Dilip Mookherjee & Stefan Reichelstein, 1995. "Hierarchical Decentralization of Incentive Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 654-672, Winter.
- Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
- Foss, Kirsten, 2001. "Organizing Technological Interdependencies: A Coordination Perspective on the Firm," Industrial and Corporate Change, Oxford University Press, vol. 10(1), pages 151-78, March.
- Nicolai J. Foss & Keld Laursen, 2002.
"Performance Pay, Delegation, and Multitasking under Uncertainty and Innovativeness An Empirical Investigation,"
DRUID Working Papers
02-14, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
- Foss, Nicolai J. & Laursen, Keld, 2005. "Performance pay, delegation and multitasking under uncertainty and innovativeness: An empirical investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 246-276, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (J. Petur Joensen) The email address of this maintainer does not seem to be valid anymore. Please ask J. Petur Joensen to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.