Published in:Columbia Business School Research Paper ; No. 17-90
Extent:
1 Online-Ressource (52 p)
Language:
English
DOI:
10.2139/ssrn.3024631
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 28, 2019 erstellt
Description:
We analyze a model of hierarchies in organizations where neither decisions themselves nor the delegation of decisions are contractible, and where power-hungry agents derive a private benefit from making decisions. Two distinct agency problems arise and interact: Subordinates take more biased decisions (which favors adding more hierarchical layers), but uninformed superiors may fail to delegate (which favors removing layers). A designer may remove intermediate layers of the hierarchy (eliminate middle managers) or de-integrate an organization by removing top layers (eliminate top managers). We show that stronger preferences for power result in smaller, more de-integrated hierarchies. Our key insight is that hoarding of decision rights is especially severe at the top of the hierarchy