IDEAS home Printed from https://ideas.repec.org/a/oup/restud/v76y2009i2p761-794.html
   My bibliography  Save this article

Optimal Dissent in Organizations

Author

Listed:
  • Augustin Landier
  • David Sraer
  • David Thesmar

Abstract

We model an organization as a two-agent hierarchy: an informed Decision Maker in charge of selecting projects and a (possibly) uninformed Implementer in charge of their execution. Both have intrinsic preferences over projects. This paper models the costs and benefits of divergence between their preferences, that is, dissent within the organization. Dissent is useful to (1) foster the use of objective (and sometimes private) information in decision making and (2) give credibility to the Decision Maker's choices. However, dissent comes at the cost of hurting the Implementer's intrinsic motivation, thereby impairing organizational efficiency. We show that dissent can be optimal, in particular, when information is useful and uncertainty is high. Moreover, dissent remains an optimal organizational form even when Implementers can choose their employer or when Decision Makers have real authority over hiring decisions. Copyright , Wiley-Blackwell.

Suggested Citation

  • Augustin Landier & David Sraer & David Thesmar, 2009. "Optimal Dissent in Organizations," Review of Economic Studies, Oxford University Press, vol. 76(2), pages 761-794.
  • Handle: RePEc:oup:restud:v:76:y:2009:i:2:p:761-794
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/j.1467-937X.2009.00544.x
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    Citations

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


    Cited by:

    1. Randall Morck & Bernard Yeung, 2010. "Agency Problems and the Fate of Capitalism," NBER Working Papers 16490, National Bureau of Economic Research, Inc.
    2. Ján Zábojník, 2010. "Disobedience and Authority," Journal of Law, Economics, and Organization, Oxford University Press, vol. 26(3), pages 427-459.
    3. Viral V. Acharya & Stewart C. Myers & Raghuram G. Rajan, 2011. "The Internal Governance of Firms," Journal of Finance, American Finance Association, vol. 66(3), pages 689-720, June.
    4. Roland Bénabou, 2013. "Groupthink: Collective Delusions in Organizations and Markets," Review of Economic Studies, Oxford University Press, vol. 80(2), pages 429-462.
    5. Laurent Bach & Nicolas Serrano-Velarde, 2009. "The Power of Dynastic Commitment," Working Papers 0924, Oxford University Centre for Business Taxation.
    6. Saori Chiba & Kaiwen Leong & Kaiwen Leong, 2013. "Cheap Talk with Outside Options," Working Papers 16, Department of Management, Università Ca' Foscari Venezia.
    7. Kräkel, Matthias & Müller, Daniel, 2015. "Merger efficiency and managerial incentives," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 51-63.
    8. Jain, Pawan & Jiang, Christine & Mekhaimer, Mohamed, 2016. "Executives' horizon, internal governance and stock market liquidity," Journal of Corporate Finance, Elsevier, vol. 40(C), pages 1-23.
    9. Brandon Schaufele, 2013. "Dissent in Parliament as Reputation Building," Working Papers 1301E, University of Ottawa, Department of Economics.
    10. Raghuram Rajan, 2012. "The Corporation in Finance," NBER Working Papers 17760, National Bureau of Economic Research, Inc.
    11. Robert Gibbons, 2010. "Inside Organizations: Pricing, Politics, and Path Dependence," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 337-365, September.
    12. Macchiavello, Rocco, 2007. "Financial Constraints and the Costs and Benefits of Vertical Integration," CEPR Discussion Papers 6104, C.E.P.R. Discussion Papers.
    13. Thomas J. Chemmanur & Viktar Fedaseyeu, 2012. "A Theory of Corporate Boards and Forced CEO Turnover," Working Papers 444, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    14. Saori Chiba & Kaiwen Leong, 2013. "Managerial Economics of Cheap Talk," Working Papers 24, Department of Management, Università Ca' Foscari Venezia.
    15. repec:eee:jeborg:v:137:y:2017:i:c:p:54-71 is not listed on IDEAS
    16. Augustin Landier & David Sraer & David Thesmar, 2009. "Financial Risk Management: When Does Independence Fail?," American Economic Review, American Economic Association, vol. 99(2), pages 454-458, May.
    17. Bing Guo, 2016. "Manager replacement, employee protest, and corporate control," Economics of Governance, Springer, vol. 17(3), pages 265-294, August.
    18. Van den Steen, Eric, 2007. "The Limits of Authority: Motivation versus Coordination," Working papers 37305, Massachusetts Institute of Technology (MIT), Sloan School of Management.
    19. Indridi Indridason, 2008. "To dissent or not to dissent? Informative dissent and parliamentary governance," Economics of Governance, Springer, vol. 9(4), pages 363-392, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:76:y:2009:i:2:p:761-794. 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: (Oxford University Press) or (Christopher F. Baum). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.