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'Tying the manager's hands': constraining opportunistic managerial intervention

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  • Kirsten Foss
  • Nicolai J. Foss
  • Xosé H. Vázquez

Abstract

We discuss and examine empirically a firm-level equivalent of the ancient problem of 'tying the King's hands', namely how to avoid managerial intervention that is undertaken to reap private benefits but is harmful to overall value creation, that is, 'managerial opportunism'. The link from managerial intervention to firm-level value-creation is moderated by employee motivation. Thus, intervention in the form of managers overruling employees or reneging on delegation may demotivate employees, particularly when the intervention is perceived as being unfair, undertaken for personal gain, etc. We argue that a number of mechanisms, such as managers staking their personal reputation, employees controlling important assets, strong trade unions, etc. may function as constraints on managerial proclivities to intervene, thus reducing the problem of managerial opportunism. We derive four hypotheses from these ideas, and test them, using path-analysis, on a rich dataset, based on 329 firms in the Spanish food and electric/electronic industries. Copyright 2006, Oxford University Press.

Suggested Citation

  • Kirsten Foss & Nicolai J. Foss & Xosé H. Vázquez, 2006. "'Tying the manager's hands': constraining opportunistic managerial intervention," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 30(5), pages 797-818, September.
    • Handle: RePEc:oup:cambje:v:30:y:2006:i:5:p:797-818
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    File URL: http://hdl.handle.net/10.1093/cje/bei107
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    Cited by:

    1. Uwe JIRJAHN & Stephen C. SMITH, 2018. "Nonunion Employee Representation: Theory And The German Experience With Mandated Works Councils," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(1), pages 201-233, March.
    2. Emil Inauen & Katja Rost & Margit Osterloh & Bruno S. Frey, 2010. "Back to the Future –A Monastic Perspective on Corporate Governance," management revue - Socio-Economic Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 21(1), pages 38-59.
    3. Sears, Joshua B., 2018. "Post-acquisition integrative versus independent innovation: A story of dueling success factors," Research Policy, Elsevier, vol. 47(9), pages 1688-1699.
    4. repec:bla:annpce:v:89:y:2018:i:1:p:201-233 is not listed on IDEAS
    5. Dominguez-Martinez, Silvia & Sloof, Randolph & von Siemens, Ferdinand A., 2014. "Monitored by your friends, not your foes: Strategic ignorance and the delegation of real authority," Games and Economic Behavior, Elsevier, vol. 85(C), pages 289-305.
    6. K. S. Manikandan & J. Ramachandran, 2015. "Beyond institutional voids: Business groups, incomplete markets, and organizational form," Strategic Management Journal, Wiley Blackwell, vol. 36(4), pages 598-617, April.
    7. Uwe Jirjahn, 2009. "The Introduction of Works Councils in German Establishments — Rent Seeking or Rent Protection?," British Journal of Industrial Relations, London School of Economics, vol. 47(3), pages 521-545, September.
    8. Thomas Johnsen, 2011. "Supply network delegation and intervention strategies during supplier involvement in new product development," Post-Print hal-00771835, HAL.
    9. Magdalena Dobrajska & Stephan Billinger & Samina Karim, 2015. "Delegation Within Hierarchies: How Information Processing and Knowledge Characteristics Influence the Allocation of Formal and Real Decision Authority," Organization Science, INFORMS, vol. 26(3), pages 687-704, June.
    10. Cécile Cézanne, 2010. "Un modèle renouvelé de gouvernance d'entreprise : une évaluation empirique sur données françaises," Revue d'économie politique, Dalloz, vol. 120(4), pages 669-700.
    11. Dellestrand, Henrik & Kappen, Philip, 2011. "Headquarters Allocation of Resources to Innovation Transfer Projects within the Multinational Enterprise," Journal of International Management, Elsevier, vol. 17(4), pages 263-277.
    12. Ciabuschi, Francesco & Dellestrand, Henrik & Kappen, Philip, 2012. "The good, the bad, and the ugly: Technology transfer competence, rent-seeking, and bargaining power," Journal of World Business, Elsevier, vol. 47(4), pages 664-674.
    13. Luigi Marengo & Corrado Pasquali, 2012. "How to Get What You Want When You Do Not Know What You Want: A Model of Incentives, Organizational Structure, and Learning," Organization Science, INFORMS, vol. 23(5), pages 1298-1310, October.

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