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The Leader as Catalyst: On Leadership and the Mechanics of Institutional Change

Listed author(s):
  • Sumon Majumdar

    ()

    (Queen's University)

  • Sharun Mukand

    ()

    (Tufts University)

Individual leaders have been central to the transformation of organizations, political institutions and many instances of social and economic reform. In this paper we take a first step towards analyzing the role of leadership to ask: when and how does a leader engineer change? We show that while underlying structural conditions and institutions are important, there is an independent first-order role for individual agency in bringing about change and thus transforming the institutions. We emphasize the key nature of the symbiotic relationship between followers decisions' to willingly entrust their faith in the leader and the leader's initiative at leading them. This two-way interaction can endogenously give rise to threshold effects; slight differences in the leader's ability or the underlying structural conditions can dramatically improve the prospects for successful change. Given the centrality of this leader-follower relationship, we further explore conditions under which an individual may deliberately prefer to follow an ambitious leader with divergent interests rather than a benevolent one with congruent preferences. Thus by virtue of having followers, both `good' and `bad' leaders may be effective at bringing about change.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1128.pdf
File Function: First version 2007
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Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1128.

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Length: 45 pages
Date of creation: Jun 2007
Handle: RePEc:qed:wpaper:1128
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Web page: http://qed.econ.queensu.ca/
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  1. Morris, Stephen & Shin, Hyun Song, 1998. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," American Economic Review, American Economic Association, vol. 88(3), pages 587-597, June.
  2. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
  3. 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.
  4. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2002. "An African Success Story: Botswana," CEPR Discussion Papers 3219, C.E.P.R. Discussion Papers.
  5. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  6. Besley, Timothy J. & Kudamatsu, Masayuki, 2007. "Making Autocracy Work," CEPR Discussion Papers 6371, C.E.P.R. Discussion Papers.
  7. Mana Komai & Mark Stegeman & Benjamin E. Hermalin, 2007. "Leadership and Information," American Economic Review, American Economic Association, vol. 97(3), pages 944-947, June.
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