Advanced Search
MyIDEAS: Login to save this paper or follow this series

Uncertainty, Task Environment, and Organization Design: An Empirical Investigation

Contents:

Author Info

  • Avner Ben-Ner

    (Industrial Relations Center, Carlson School of Management, University of Minnesota)

  • Fanmin Kong

    (Guanghua School of Management, Peking University)

  • Stéphanie Lluis

    (Department of Economics, University of Waterloo)

Abstract

The paper addresses two broad research questions: 1. How do internal uncertainty associated with the task environment and external uncertainty arising from market volatility impact organization design? 2. What are the relationships among various elements of organization design: delegation of decision-making, incentives, monitoring, and internal labor market practices (promotion, training, employment security)? We expand on Prendergast (2002a), who challenged the conventional view of a tradeoff between risk and incentives, and build a single unified framework for answering our two research questions. Using a uniquely rich dataset that contains detailed information about the task environment of core employees and organization design at the individual, group and firms levels in 530 Minnesota firms in the mid 1990s, we first find support for Prendergast's key argument that internal uncertainty (over which employees have control) affects directly the allocation of decision-making and only indirectly incentives (via allocation of decision-making). This confirms similar findings by Foss and Laursen (2005), DeVaro and Kurtulus (2010) and Shi (2011). We also find that internal uncertainty has much impact on organization design through the choice of delegation of decision-making at the employee level, less so at the group level, and very little at the firm level, whereas external (market) uncertainty has little effect on organization design, especially at the individual and group level. Decision-making, monitoring, various internal labor market practices and incentives are strongly related to each other through substitution and complementarity.

Download Info

If 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.
File URL: http://economics.uwaterloo.ca/documents/11-005SL.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Waterloo, Department of Economics in its series Working Papers with number 1105.

as in new window
Length: 60 pages
Date of creation: Dec 2011
Date of revision: Dec 2011
Handle: RePEc:wat:wpaper:1105

Contact details of provider:
Postal: Waterloo, Ontario, N2L 3G1
Phone: (519) 888-4567 ext 33695
Fax: (519) 725-0530
Web page: http://economics.uwaterloo.ca/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Lindbeck, Assar & Snower, Dennis J, 2000. "Multitask Learning and the Reorganization of Work: From Tayloristic to Holistic Organization," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 18(3), pages 353-76, July.
  2. Ennen, Edgar & Richter, Ansgar, 2009. "The Whole Is More Than the Sum of Its Parts - Or Is It? A Review of the Empirical Literature on Complementarities in Organizations," MPRA Paper 15666, University Library of Munich, Germany.
  3. Dickinson, David & Villeval, Marie Claire, 2004. "Does Monitoring Decrease Work Effort? The Complementarity Between Agency and Crowding-Out Theories," IZA Discussion Papers 1222, Institute for the Study of Labor (IZA).
  4. Oliver Hart & John Moore, 1999. "On the Design of Hierarchies: Coordination Versus Specialization," STICERD - Theoretical Economics Paper Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE 375, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  5. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, American Economic Association, vol. 87(3), pages 291-313, June.
  6. David Neumark & Peter Cappelli, 1999. "Do "High Performance" Work Practices Improve Establishment-Level Outcomes?," NBER Working Papers 7374, National Bureau of Economic Research, Inc.
  7. Avner Ben-Ner & Stephanie Lluis, . "Learning: What and How? An Empirical Study of Adjustments in Workplace Organization Structure," Working Papers, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus) 0407, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
  8. Keld Laursen & Nicolai J. Foss, 2003. "New human resource management practices, complementarities and the impact on innovation performance," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 27(2), pages 243-263, March.
  9. Daniel S. Nagin & James B. Rebitzer & Seth Sanders & Lowell J. Taylor, 2002. "Monitoring, Motivation, and Management: The Determinants of Opportunistic Behavior in a Field Experiment," American Economic Review, American Economic Association, American Economic Association, vol. 92(4), pages 850-873, September.
  10. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(5), pages 874-904, October.
  11. Paul Osterman, 1994. "How common is workplace transformation and who adopts it?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(2), pages 173-188, January.
  12. Canice Prendergast, 2002. "The Tenuous Trade-off between Risk and Incentives," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(5), pages 1071-1102, October.
  13. Rebitzer, James B., 1995. "Is there a trade-off between supervision and wages? An empirical test of efficiency wage theory," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 28(1), pages 107-129, September.
  14. Lorenzo Cappellari & Stephen P. Jenkins, 2003. "Multivariate probit regression using simulated maximum likelihood," Stata Journal, StataCorp LP, StataCorp LP, vol. 3(3), pages 278-294, September.
  15. Raith, Michael, 2004. "Specific Knowledge and Performance Measurement," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4262, C.E.P.R. Discussion Papers.
  16. Neal, Derek, 1993. "Supervision and Wages across Industries," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 409-17, August.
  17. repec:eme:rlepps:v:18:y:1999:i:1999:p:177-242 is not listed on IDEAS
  18. Paul Osterman, 2000. "Work reorganization in an era of restructuring: Trends in diffusion and effects on employee welfare," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 53(2), pages 179-196, January.
  19. Grandori, Anna, 1991. "Negotiating efficient organization forms," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 16(3), pages 319-340, December.
  20. Ben-Ner Avner & Montias John Michael & Neuberger Egon, 1993. "Basic Issues in Organizations: A Comparative Perspective," Journal of Comparative Economics, Elsevier, vol. 17(2), pages 207-242, June.
  21. Carmichael, H Lorne & MacLeod, W Bentley, 2000. "Worker Cooperation and the Ratchet Effect," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 18(1), pages 1-19, January.
  22. David Autor & Frank Levy & Richard Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Nov.
  23. Francine Lafontaine & Margaret E. Slade, 1998. "Incentive Contracting and the Franchise Decision," NBER Working Papers 6544, National Bureau of Economic Research, Inc.
  24. Shi, Lan, 2011. "Respondable risk and incentives for CEOs: The role of information-collection and decision-making," Journal of Corporate Finance, Elsevier, Elsevier, vol. 17(1), pages 189-205, February.
  25. John MacDuffie, 1995. "Human resource bundles and manufacturing performance: Organizational logic and flexible production systems in the world auto industry," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 48(2), pages 197-221, January.
  26. Carmichael, H Lorne, 1988. "Incentives in Academics: Why Is There Tenure?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(3), pages 453-72, June.
  27. Zoghi, Cindy & Levenson, Alec R. & Gibbs, Michael, 2005. "Why Are Jobs Designed the Way They Are?," IZA Discussion Papers 1529, Institute for the Study of Labor (IZA).
  28. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 19(2-3), pages 179-208, April.
  29. Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, American Economic Association, vol. 84(4), pages 972-91, September.
  30. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 37(1), pages 7-63, March.
  31. Jed DeVaro & Fidan Ana Kurtulus, 2010. "An An Empirical Analysis of Risk, Incentives and the Delegation of Worker Authority," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 63(4), pages 641-661, July.
  32. Demougin, Dominique & Fluet, Claude, 2001. "Monitoring versus incentives," European Economic Review, Elsevier, Elsevier, vol. 45(9), pages 1741-1764, October.
  33. Rantakari Heikki V, 2008. "On the Role of Uncertainty in the Risk-Incentives Tradeoff," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 8(1), pages 1-25, April.
  34. Zabojnik, Jan, 1996. "Pay-performance sensitivity and production uncertainty," Economics Letters, Elsevier, Elsevier, vol. 53(3), pages 291-296, December.
  35. Eisenberg Daniel & Rowe Brian, 2009. "The Effect of Smoking in Young Adulthood on Smoking Later in Life: Evidence based on the Vietnam Era Draft Lottery," Forum for Health Economics & Policy, De Gruyter, De Gruyter, vol. 12(2), pages 1-34, June.
  36. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(6), pages 1119-58, December.
  37. Foss, Nicolai J. & Laursen, Keld, 2005. "Performance pay, delegation and multitasking under uncertainty and innovativeness: An empirical investigation," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 58(2), pages 246-276, October.
  38. Wilde, Joachim, 2000. "Identification of multiple equation probit models with endogenous dummy regressors," Economics Letters, Elsevier, Elsevier, vol. 69(3), pages 309-312, December.
  39. Susan Athey & Scott Stern, 1998. "An Empirical Framework for Testing Theories About Complimentarity in Organizational Design," NBER Working Papers 6600, National Bureau of Economic Research, Inc.
  40. Julie Wulf, 2007. "AUTHORITY, RISK, AND PERFORMANCE INCENTIVES: EVIDENCE FROM DIVISION MANAGER POSITIONS INSIDE FIRMS -super-* ," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 55(1), pages 169-196, 03.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Avner Ben-Ner & Matthew Ellman, 2013. "The contributions of behavioural economics to understanding and advancing the sustainability of worker cooperatives," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, European Research Institute on Cooperative and Social Enterprises, vol. 2(1), pages 75-100, August.
  2. Ben-Ner, Avner, 2013. "Preferences and organization structure: Toward behavioral economics micro-foundations of organizational analysis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 46(C), pages 87-96.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wat:wpaper:1105. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Pat Gruber).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.