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Employee Initiative and Managerial Control

Author

Listed:
  • Heikki Rantakari

Abstract

I analyze the impact of managerial involvement and the allocation of authority on employee initiative in a setting where both a manager and an employee can originate new ideas for implementation. I show that employee initiative is maximized through the combination of formal authority and limited but positive levels of involvement by the manager, a result which thus qualifies the motivational advantages of both formal delegation and a hands-off management strategy. This result arises through an indirect monitoring role played by managerial involvement that has been absent in previous frameworks, and the implications of which for the optimal organizational arrangement are further analyzed. (JEL D23, M12, M54)

Suggested Citation

  • Heikki Rantakari, 2012. "Employee Initiative and Managerial Control," American Economic Journal: Microeconomics, American Economic Association, vol. 4(3), pages 171-211, August.
  • Handle: RePEc:aea:aejmic:v:4:y:2012:i:3:p:171-211
    Note: DOI: 10.1257/mic.4.3.171
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mic.4.3.171
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    References listed on IDEAS

    as
    1. 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.
    2. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    3. Helmut Bester & Daniel Krähmer, 2008. "Delegation and incentives," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 664-682.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Marc Gürtler & Oliver Gürtler, 2015. "The Optimality of Heterogeneous Tournaments," Journal of Labor Economics, University of Chicago Press, vol. 33(4), pages 1007-1042.
    2. Nadav Levy, 2014. "Domain knowledge, ability, and the principal's authority relations," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 370-394, June.
    3. Emre Ekinci & Nikos Theodoropoulos, 2018. "Informal Delegation and Training," University of Cyprus Working Papers in Economics 02-2018, University of Cyprus Department of Economics.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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