IDEAS home Printed from https://ideas.repec.org/a/cuf/journl/y2003v4i1p137-149.html
   My bibliography  Save this article

Monitoring the Monitor: Does Ownership Matter?

Author

Listed:
  • Yijiang Wang

    (University of Minnesota)

Abstract

One of the most intriguing and influential questions in organizational theory is ¡°who monitors the monitor?¡± A theory of ownership is proposed by Alchian and Demsetz in answer to this question. In this paper, a model of successive monitoring is constructed to show that, when it is feasible for a capitalist owner to overcome free riding in a team through monitoring, it is equally feasible for the workers as owners to do so with an outcome-based incentive for the monitor at the top. Thus the answer to the question ¡±who monitors the monitor¡± has no specific implications for ownership, capitalist or labor. While ownership is neutral in affecting the feasibility of monitoring, it is generally not so in affecting income distribution and other design variables in the organization.

Suggested Citation

  • Yijiang Wang, 2003. "Monitoring the Monitor: Does Ownership Matter?," Annals of Economics and Finance, Society for AEF, vol. 4(1), pages 137-149, May.
    • Handle: RePEc:cuf:journl:y:2003:v:4:i:1:p:137-149
    as

    Download full text from publisher

    File URL: http://aeconf.com/Articles/May2003/aef040108.pdf
    Download Restriction: no
    File URL: http://down.aefweb.net/AefArticles/aef040108.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Oliver E. Williamson, 1967. "Hierarchical Control and Optimum Firm Size," Journal of Political Economy, University of Chicago Press, vol. 75(2), pages 123-123.
    2. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    3. Calvo, Guillermo A & Wellisz, Stanislaw, 1978. "Supervision, Loss of Control, and the Optimum Size of the Firm," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 943-952, October.
    4. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    5. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    6. Bonin John P. & Putterman Louis, 1993. "Incentives and Monitoring in Cooperatives with Labor-Proportionate Sharing Schemes," Journal of Comparative Economics, Elsevier, vol. 17(3), pages 663-686, September.
    7. Ben Craig & John Pencavel, 1995. "Participation and Productiviy: A Comparison of Worker Cooperatives and Conventional Firms in the Plywood Industry," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995 Micr), pages 121-174.
    8. Bonin, John P & Jones, Derek C & Putterman, Louis, 1993. "Theoretical and Empirical Studies of Producer Cooperatives: Will Ever the Twain Meet?," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1290-1320, September.
    9. Ben-ner, Avner, 1988. "The life cycle of worker-owned firms in market economies : A theoretical analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 10(3), pages 287-313, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gregory Dow, 2001. "Allocating Control over Firms: Stock Markets versus Membership Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(2), pages 201-218, March.
    2. Dow,Gregory K., 2019. "The Labor-Managed Firm," Cambridge Books, Cambridge University Press, number 9781107589650, January.
    3. Marina Albanese & Cecilia Navarra & Ermanno Tortia, 2019. "Equilibrium unemployment as a worker insurance device: wage setting in worker owned enterprises," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(3), pages 653-671, October.
    4. Mehmet Bac, 2007. "Optimal supervision intensity, collusion, and the organization of work," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(1), pages 317-339, February.
    5. Chong-En Bai & Chenggang Xu, 2001. "Ownership, Incentives and Monitoring," STICERD - Theoretical Economics Paper Series 413, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    6. Arando, Saioa & Gago, Monica & Jones, Derek C. & Kato, Takao, 2011. "Efficiency in Employee-Owned Enterprises: An Econometric Case Study of Mondragon," IZA Discussion Papers 5711, Institute of Labor Economics (IZA).
    7. Cayer, Mario & Minkler, Lanse, 1998. "Dualism, dialogue and organizations: Reflections on organizational transformation and labor-managed firms," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 27(1), pages 53-77.
    8. Tortia, Ermanno Celeste, 2019. "Employment protection regimes in worker co-operatives: dismissal of worker members and distributive fairness," MPRA Paper 94536, University Library of Munich, Germany.
    9. Etro, Federico, 2016. "Research in economics and industrial organization," Research in Economics, Elsevier, vol. 70(4), pages 511-517.
    10. Rolf Bühner & Jörg Digmayer, 2003. "Aktienmarktreaktionen auf die Ankündigungen von Spin-offs und Sell-offs," Schmalenbach Journal of Business Research, Springer, vol. 55(7), pages 657-677, November.
    11. Dow, Gregory K. & Putterman, Louis, 2000. "Why capital suppliers (usually) hire workers: what we know and what we need to know," Journal of Economic Behavior & Organization, Elsevier, vol. 43(3), pages 319-336, November.
    12. Simona Monteleone & Francesco Reito, 2018. "Cooperative firms in hard times," Small Business Economics, Springer, vol. 51(1), pages 171-179, June.
    13. Lindbeck, Assar & Snower, Dennis J., 2003. "The Firm as a Pool of Factor Complementarities," IZA Discussion Papers 882, Institute of Labor Economics (IZA).
    14. Tortia, Ermanno C., 2021. "Employment protection regimes and dismissal of members in worker cooperatives," MPRA Paper 109214, University Library of Munich, Germany.
    15. Depken II, Craig A. & Redmount, Esther & Snow, Arthur, 2001. "Shirking and the choice of technology: a theory of production inefficiency with an empirical application," Journal of Economic Behavior & Organization, Elsevier, vol. 44(4), pages 383-402, April.
    16. MARTIN Ludivine, 2007. "The impact of technological changes on incentives and motivations to work hard," IRISS Working Paper Series 2007-15, IRISS at CEPS/INSTEAD.
    17. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    18. Raghuram G. Rajan & Luigi Zingales, 1998. "Power in a Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 387-432.
    19. Scott Shane, 2001. "Organizational Incentives and Organizational Mortality," Organization Science, INFORMS, vol. 12(2), pages 136-160, April.
    20. Thomas N Hubbard & Luis Garicano, 2003. "Specialization, Firms, and Markets: The Division of Labor Within and Between Law Firms," Working Papers 03-13, Center for Economic Studies, U.S. Census Bureau.
    21. Tobias Hiller, 2021. "Hierarchy and the size of a firm," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 68(3), pages 389-404, September.

    More about this item

    Keywords

    Monitor; Ownership;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cuf:journl:y:2003:v:4:i:1:p:137-149. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Qiang Gao (email available below). General contact details of provider: https://edirc.repec.org/data/emcufcn.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.