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The Hierarchical Erosion Effect: A New Perspective on Perceptual Differences and Business Performance

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  • Cristina B. Gibson
  • Julian Birkinshaw
  • Dana McDaniel Sumpter
  • Tina Ambos

Abstract

Organizations are coalitions of individuals with heterogeneous interests and perceptions (March and Simon, 1958/1993). We examine an important source of heterogeneity, namely the different perceptions individuals hold across hierarchical levels. We introduce the notion of a hierarchical erosion effect whereby individual perceptions about specific practices become less favourable the lower one goes in the hierarchy. Using data from 4,243 employees across four levels in 38 business units, we provide evidence that this effect exists, controlling for other factors, including the overall favourability of the business unit culture across eight practices. We show how the size of this hierarchical erosion effect varies depending on the nature of the organizational practice being evaluated and the extent to which executives share strategic information widely, and we also show that a lower hierarchical erosion effect is correlated with higher business unit growth. In doing so, we enrich understanding of two aspects of March and Simon's work, their notion of intra‐organizational heterogeneity and their distinctive view of the nature of hierarchy.

Suggested Citation

  • Cristina B. Gibson & Julian Birkinshaw & Dana McDaniel Sumpter & Tina Ambos, 2019. "The Hierarchical Erosion Effect: A New Perspective on Perceptual Differences and Business Performance," Journal of Management Studies, Wiley Blackwell, vol. 56(8), pages 1713-1747, December.
    • Handle: RePEc:bla:jomstd:v:56:y:2019:i:8:p:1713-1747
    DOI: 10.1111/joms.12443
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    Cited by:

    1. Daniel R. Clark & Robert J. Pidduck & G. T. Lumpkin & Jeffrey G. Covin, 2024. "Is It Okay to Study Entrepreneurial Orientation (EO) at the Individual Level? Yes!," Entrepreneurship Theory and Practice, , vol. 48(1), pages 349-391, January.
    2. Fawad Sadiq & Tasweer Hussain & Afshan Naseem & Muhammad Zeeshan Mirza & Ahsan Ali Syed, 2022. "The pursuit of disruptive innovations by middle managers: effects of the firm’s customer orientation and mastery achievement goals," Review of Managerial Science, Springer, vol. 16(2), pages 551-581, February.
    3. Andreea N. Kiss & Dirk Libaers & Pamela S. Barr & Tang Wang & Miles A. Zachary, 2020. "CEO cognitive flexibility, information search, and organizational ambidexterity," Strategic Management Journal, Wiley Blackwell, vol. 41(12), pages 2200-2233, December.

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