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Management Turnover, Strategic Ambiguity and Supply Incentives

Author

Listed:
  • Pasquier Nicolas
  • Toquebeuf Pascal

    (Université Grenoble Alpes, CNRS, INRA, Grenoble INP, GAEL, 38000, Grenoble, France)

Abstract

When a firm appoints a new manager, it reopens the possibility of new contractual friction with its partners. We explore strategic ambiguity as a potential for friction with a supplier. The firm’s new manager probably has fuzzy expectations about the supplier’s strategy. An optimistic manager weights favorable strategies more heavily than detrimental ones, whereas a pessimistic manager does the opposite. We show that the manager’s degree of optimism is critical: above a threshold, it can cause the supplier to change the timing of its contracting and increase its profits. We also find that this threshold degree of optimism depends on the degree of product substitution: it is more stringent with imperfect substitutes than with perfect substitutes or unrelated goods.

Suggested Citation

  • Pasquier Nicolas & Toquebeuf Pascal, 2023. "Management Turnover, Strategic Ambiguity and Supply Incentives," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 23(1), pages 121-154, January.
    • Handle: RePEc:bpj:bejtec:v:23:y:2023:i:1:p:121-154:n:16
    DOI: 10.1515/bejte-2021-0070
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    More about this item

    Keywords

    vertical contracting; strategic ambiguity; ambiguity attitude;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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