Citation:
Ghemawat, Pankaj, and Eric J. Van den Steen. "Irreversibility." In The Palgrave Encyclopedia of Strategic Management. Continuously updated edition, edited by Mie Augier and David J. Teece. Palgrave Macmillan, 2018. Electronic. View Details
Article American Economic Review March 2010 Interpersonal Authority in a Theory of the Firm |
Abstract
This paper develops a theory of the firm in which a firm's centralized asset ownership and low-powered incentives give the manager, as an equilibrium outcome, interpersonal authority over employees (in a world with open disagreement). The paper thus provides micro-foundations for the idea that bringing a project inside the firm gives the manager control over that project, while explaining concentrated asset ownership, low-powered incentives, and centralized authority as typical characteristics of firms. The paper also leads to new perspectives on the firm as a legal entity and on the relationship between the Knightian and Coasian views of the firm. (JEL L22, D23, D81)
Keywords: Theory; Assets; Ownership; Motivation and Incentives; Governance Controls; Power and Influence; Projects; Perspective; Employees;
Citation:
Van den Steen, Eric J. "Interpersonal Authority in a Theory of the Firm." American Economic Review 100, no. 1 (March 2010): 466–490.