IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v54y2008i5p863-877.html
   My bibliography  Save this article

The Hidden Perils of Career Concerns in R& D Organizations

Author

Listed:
  • Enno Siemsen

    (College of Business, University of Illinois at Urbana-Champaign, Champaign, Illinois 61820)

Abstract

This research examines how certain economic incentives can lead agents to prefer difficult solutions to their organizational tasks that reduce their likelihood of obtaining a successful task outcome. Drawing on the career concerns literature, I model a decision context in which agents have the operational autonomy to choose among different solutions. Analyzing this model reveals that agents with career concerns will, under certain conditions, deliberately reduce their likelihood of succeeding with a task by choosing a solution that makes their task more difficult. These findings suggest that highly capable agents prefer moderately difficult tasks to showcase their capability, while less-capable agents prefer highly difficult tasks to mask their lack of capability. The robustness of these results is examined in various extensions. Furthermore, the paper provides insights on how incentives can be designed to alleviate this problem.

Suggested Citation

  • Enno Siemsen, 2008. "The Hidden Perils of Career Concerns in R& D Organizations," Management Science, INFORMS, vol. 54(5), pages 863-877, May.
    • Handle: RePEc:inm:ormnsc:v:54:y:2008:i:5:p:863-877
    DOI: 10.1287/mnsc.1070.0797
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.1070.0797
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.1070.0797?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Daniela Grieco & Robin Hogarth, 2004. "Excess entry, ambiguity seeking and competence: An experimental investigation," Economics Working Papers 778, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
    3. Richard A. Lambert, 1986. "Executive Effort and Selection of Risky Projects," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 77-88, Spring.
    4. Gibbons, Robert & Murphy, Kevin J, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 468-505, June.
    5. repec:ner:ucllon:http://discovery.ucl.ac.uk/17678/ is not listed on IDEAS
    6. Yeon-Koo Che & Seung-Weon Yoo, 2001. "Optimal Incentives for Teams," American Economic Review, American Economic Association, vol. 91(3), pages 525-541, June.
    7. Christoph H. Loch & D. Charles Galunic & Susan Schneider, 2006. "Balancing cooperation and competition in human groups: the role of emotional algorithms and evolution," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(2-3), pages 217-233.
    8. Baker, George & Gibbons, Robert & Murphy, Kevin J, 1999. "Informal Authority in Organizations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 56-73, April.
    9. Robert Gibbons & Michael Waldman, 1999. "A Theory of Wage and Promotion Dynamics Inside Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1321-1358.
    10. Oddvar M. Kaarbøe & Trond E. Olsen, 2006. "Career Concerns, Monetary Incentives and Job Design," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(2), pages 299-316, July.
    11. Zwiebel, Jeffrey, 1995. "Corporate Conservatism and Relative Compensation," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 1-25, February.
    12. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    13. Kevin B. Hendricks & Vinod R. Singhal, 2005. "Association Between Supply Chain Glitches and Operating Performance," Management Science, INFORMS, vol. 51(5), pages 695-711, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jeremy Hutchison-Krupat & Stylianos Kavadias, 2015. "Strategic Resource Allocation: Top-Down, Bottom-Up, and the Value of Strategic Buckets," Management Science, INFORMS, vol. 61(2), pages 391-412, February.
    2. Henry Sauermann & Wesley M. Cohen, 2010. "What Makes Them Tick? Employee Motives and Firm Innovation," Management Science, INFORMS, vol. 56(12), pages 2134-2153, December.
    3. Jürgen Mihm, 2010. "Incentives in New Product Development Projects and the Role of Target Costing," Management Science, INFORMS, vol. 56(8), pages 1324-1344, August.
    4. Elena Katok & Enno Siemsen, 2011. "Why Genius Leads to Adversity: Experimental Evidence on the Reputational Effects of Task Difficulty Choices," Management Science, INFORMS, vol. 57(6), pages 1042-1054, June.
    5. Raul O. Chao & Stylianos Kavadias & Cheryl Gaimon, 2009. "Revenue Driven Resource Allocation: Funding Authority, Incentives, and New Product Development Portfolio Management," Management Science, INFORMS, vol. 55(9), pages 1556-1569, September.
    6. Kräkel, Matthias, 2021. "On the delegation of authority," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 965-981.
    7. Xin Liu, 2020. "Impression management against early dismissal? CEO succession and corporate social responsibility," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 999-1016, March.
    8. Laura J. Kornish & Jeremy Hutchison‐Krupat, 2017. "Research on Idea Generation and Selection: Implications for Management of Technology," Production and Operations Management, Production and Operations Management Society, vol. 26(4), pages 633-651, April.
    9. Vivek Tandon & Puay Khoon Toh, 2022. "Who deviates? Technological opportunities, career concern, and inventor's distant search," Strategic Management Journal, Wiley Blackwell, vol. 43(4), pages 724-757, April.
    10. Jeremy Hutchison-Krupat, 2018. "Communication, Incentives, and the Execution of a Strategic Initiative," Management Science, INFORMS, vol. 64(7), pages 3380-3399, July.
    11. Jochen Schlapp & Nektarios Oraiopoulos & Vincent Mak, 2015. "Resource Allocation Decisions Under Imperfect Evaluation and Organizational Dynamics," Management Science, INFORMS, vol. 61(9), pages 2139-2159, September.
    12. Phong T. H. Ngo & Steven Roberts, 2021. "There is no ‘I’ in team: Career concerns, risk‐taking incentives, and team outcomes," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(1), pages 122-138, February.

    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. Englmaier, Florian & Filipi, Ales & Singh, Ravi, 2010. "Incentives, reputation and the allocation of authority," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 413-427, November.
    2. Raul O. Chao & Stylianos Kavadias & Cheryl Gaimon, 2009. "Revenue Driven Resource Allocation: Funding Authority, Incentives, and New Product Development Portfolio Management," Management Science, INFORMS, vol. 55(9), pages 1556-1569, September.
    3. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    4. Citci, Sadettin Haluk & Inci, Eren, 2016. "The masquerade ball of the CEOs and the mask of excessive risk," Economic Modelling, Elsevier, vol. 58(C), pages 383-393.
    5. Tom Coupé & Valérie Smeets & Frédéric Warzynski, 2006. "Incentives, Sorting and Productivity along the Career: Evidence from a Sample of Top Economists," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 22(1), pages 137-167, April.
    6. Dirk Sliwka, 2001. "On the Costs and Benefits of Delegation in Organizations," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(4), pages 568-590, December.
    7. Martinez Leonardo, 2009. "Reputation, Career Concerns, and Job Assignments," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-29, May.
    8. Luis Garicano & Richard A. Posner, 2005. "Intelligence Failures: An Organizational Economics Perspective," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 151-170, Fall.
    9. Duchin, Ran & Schmidt, Breno, 2013. "Riding the merger wave: Uncertainty, reduced monitoring, and bad acquisitions," Journal of Financial Economics, Elsevier, vol. 107(1), pages 69-88.
    10. Judith Chevalier & Glenn Ellison, 1999. "Career Concerns of Mutual Fund Managers," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(2), pages 389-432.
    11. Hui Liang James, 2020. "CEO age and tax planning," Review of Financial Economics, John Wiley & Sons, vol. 38(2), pages 275-299, April.
    12. Kräkel, Matthias & Müller, Daniel, 2013. "Bad Mergers Revisited: An Incentive Perspective," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79914, Verein für Socialpolitik / German Economic Association.
    13. Alexander K. Koch & Eloïc Peyrache, 2011. "Aligning Ambition and Incentives," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 27(3), pages 655-688.
    14. Nohel, Tom & Todd, Steven, 2005. "Compensation for managers with career concerns: the role of stock options in optimal contracts," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 229-251, March.
    15. Peter O. Christensen & Hans Frimor & Florin Şabac, 2020. "Real Incentive Effects of Soft Information," Contemporary Accounting Research, John Wiley & Sons, vol. 37(1), pages 514-541, March.
    16. Yaozhong Wu & Christoph H. Loch & Ludo Van der Heyden, 2008. "A Model of Fair Process and Its Limits," Manufacturing & Service Operations Management, INFORMS, vol. 10(4), pages 637-653, June.
    17. Lam, W., 2015. "Status in Organizations," LIDAM Discussion Papers CORE 2015033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    18. repec:dau:papers:123456789/2363 is not listed on IDEAS
    19. repec:dau:papers:123456789/4126 is not listed on IDEAS
    20. Koch Alexander K & Morgenstern Albrecht, 2010. "Coordination under the Shadow of Career Concerns," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-40, March.
    21. Renée B. Adams & Daniel Ferreira, 2009. "Strong Managers, Weak Boards?," CESifo Economic Studies, CESifo Group, vol. 55(3-4), pages 482-514.
    22. Matthias Kräkel, 2017. "Authority and Incentives in Organizations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(2), pages 295-311, April.
    23. Hans K. Hvide & Tore Leite, 2003. "A Theory of Capital Structure with Strategic Defaults and Priority Violations," Finance 0311003, University Library of Munich, Germany.

    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:inm:ormnsc:v:54:y:2008:i:5:p:863-877. 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: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.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.