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Value Oriented Organizations with Value Neutral Hierarchies

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Abstract

This paper gives a game-theoretical treatment of the institutional homogenization of value-oriented firms. It explains why intrinsically motivated, value-oriented firms like non-profits may become similar to for-profit firms in terms of organization and norms. It highlights and explains the pairs: value-oriented and flat organizations in contrast to value-neutral managers and hierarchical organizations. We consider a major donor like the government who delegates a project to an organization without endowments under asymmetric information. The non-profit is able to adapt its organization by establishing a hierarchy with an intrinsically motivated manager. The donor can in turn react by employing institutions in order to cope with information asymmetries regarding the mission of the organization and the unverifiable values of the manager. Two main cases are examined, one without competition and a competitive case. The equilibrium in the first case is a flat organization or alternatively highly altruistic hierarchy. The second competitive case is characterized by a value neutral hierarchy.

Suggested Citation

  • Echeverría, Manuel, 2012. "Value Oriented Organizations with Value Neutral Hierarchies," Working Papers 2012:25, Lund University, Department of Economics.
  • Handle: RePEc:hhs:lunewp:2012_025
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    File URL: http://project.nek.lu.se/publications/workpap/papers/WP12_25.pdf
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    1. Gregg, Paul & Grout, Paul A. & Ratcliffe, Anita & Smith, Sarah & Windmeijer, Frank, 2011. "How important is pro-social behaviour in the delivery of public services?," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 758-766, August.
    2. Patrick Francois, 2003. "Not-For-Profit Provision of Public Services," Economic Journal, Royal Economic Society, vol. 113(486), pages 53-61, March.
    3. Erik Canton, 2005. "Power of Incentives in Public Organizations When Employees Are Intrinsically Motivated," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(4), pages 664-664, December.
    4. Delfgaauw, Josse & Dur, Robert, 2010. "Managerial talent, motivation, and self-selection into public management," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 654-660, October.
    5. repec:hrv:faseco:33078971 is not listed on IDEAS
    6. Eric Van den Steen, 2010. "On the origin of shared beliefs (and corporate culture)," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 617-648.
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    More about this item

    Keywords

    Institutional change; Governance; Nonprofit; Hierarchy; Culture;

    JEL classification:

    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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