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Leadership, Coordination, and Corporate Culture

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  • Markus K. Brunnermeier
  • Laura Veldkamp

Abstract

What is the role of leaders in large organizations? We propose a model in which a leader helps to overcome a misalignment of followers' incentives that inhibits coordination, while adapting the organization to a changing environment. Good leadership requires vision and special personality traits such as conviction or resoluteness to enhance the credibility of mission statements and to effectively rally agents around them. Resoluteness allows leaders to overcome a time-consistency problem that arises from the fact that leaders learn about the best course of action for the organization over time. However, resoluteness also inhibits bottom-up information flow from followers. The optimal level of resoluteness depends on followers' signal quality and the corporate culture of the organization. Copyright 2013, Oxford University Press.

Suggested Citation

  • Markus K. Brunnermeier & Laura Veldkamp, 2013. "Leadership, Coordination, and Corporate Culture," Review of Economic Studies, Oxford University Press, vol. 80(2), pages 512-537.
  • Handle: RePEc:oup:restud:v:80:y:2013:i:2:p:512-537
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    File URL: http://hdl.handle.net/10.1093/restud/rds041
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    References listed on IDEAS

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    Cited by:

    1. Herz, Holger & Schunk, Daniel & Zehnder, Christian, 2014. "How do judgmental overconfidence and overoptimism shape innovative activity?," Games and Economic Behavior, Elsevier, vol. 83(C), pages 1-23.
    2. Dutta, Rohan & Levine, David Knudsen & Modica, Salvatore, 2018. "Collusion constrained equilibrium," Theoretical Economics, Econometric Society, vol. 13(1), January.
    3. repec:kap:expeco:v:20:y:2017:i:4:d:10.1007_s10683-017-9512-9 is not listed on IDEAS
    4. Rohan Dutta & David K Levine & Salvatore Modica, 2014. "Collusion, Randomization and Leadership in Groups," Levine's Working Paper Archive 786969000000000982, David K. Levine.
    5. repec:spr:jknowl:v:8:y:2017:i:2:d:10.1007_s13132-016-0434-0 is not listed on IDEAS
    6. Bernard Herskovic & Joao Ramos, 2016. "Acquiring information through peers," 2016 Meeting Papers 248, Society for Economic Dynamics.
    7. Sabrina T. Howell, 2017. "Learning from Feedback: Evidence from New Ventures," NBER Working Papers 23874, National Bureau of Economic Research, Inc.

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