The Optimal Allocation of Power in Organizations

Carbonara, Emanuela (1999) The Optimal Allocation of Power in Organizations. DOI 10.6092/unibo/amsacta/708.
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Abstract

Starting from the separation between formal and real authority, the paper considers a hierarchical relation where delegation of control can be used as an incentive mechanism. It shows that delegation is optimal when parties’ interests are neither too divergent nor too close. In that case superiors do not need to monitor too closely, curbing the subordinates’ initiative and subordinates have no incentives to free ride on the superiors’ information. The analysis is then extended to a multi- period setting. If subordinates acquire expertise on the job (learning by doing), effort has the nature of a specific investment whose intrinsic value is higher the longer the subordinate’s working life. Therefore, a policy of gradual delegation is possible, where agents accept weaker in- centives at the beginning of their career, requiring stronger incentives over time as the value of their knowledge diminishes.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Carbonara, Emanuela
Keywords
Control Rights Learning by Doing Formal Authority Real Authority Dynamic Incentives
Subjects
DOI
Deposit date
17 Jun 2004
Last modified
17 Feb 2016 14:01
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