IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/26304.html
   My bibliography  Save this paper

The Impacts of Managerial Autonomy on Firm Outcomes

Author

Listed:
  • Namrata Kala

Abstract

The allocation of decision rights within organizations influences resource allocation, expansion decisions, and ultimately outcomes. Using a newly constructed dataset, I estimate the effects of an earned autonomy program for State Owned Enterprises (SOEs) in India. The program gave managers (the board of directors) of profitable SOEs more autonomy over strategic decisions such as capital expansion and the formation of joint ventures. I find that autonomy allows SOEs to increase their capital stock and form more strategic partnerships which leads to greater sales and profits. I also find that the likelihood that a manager subsequently joins a board of a private firm is greater for managers of those SOEs which were granted autonomy, indicating that career concerns is a consistent explanation for these managerial decisions. Taken together, these results indicate that large gains in SOE performance are possible without privatization (by policies like earned autonomy) and may occur partly through managers' career concerns.

Suggested Citation

  • Namrata Kala, 2019. "The Impacts of Managerial Autonomy on Firm Outcomes," NBER Working Papers 26304, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26304
    Note: DEV PR
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w26304.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andrei Shleifer, 1998. "State versus Private Ownership," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 133-150, Fall.
    2. David Dollar & Shang-Jin Wei, 2007. "Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China," IMF Working Papers 2007/009, International Monetary Fund.
    3. Philippe Aghion & Nicholas Bloom & Brian Lucking & Raffaella Sadun & John Van Reenen, 2021. "Turbulence, Firm Decentralization, and Growth in Bad Times," American Economic Journal: Applied Economics, American Economic Association, vol. 13(1), pages 133-169, January.
    4. Chang-Tai Hsieh & Zheng (Michael) Song, 2015. "Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(1 (Spring), pages 295-366.
    5. Daniel Berkowitz & Hong Ma & Shuichiro Nishioka, 2017. "Recasting the Iron Rice Bowl: The Reform of China's State-Owned Enterprises," The Review of Economics and Statistics, MIT Press, vol. 99(4), pages 735-747, July.
    6. Chang-Tai Hsieh & Zheng (Michael) Song, 2015. "Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(1 (Spring), pages 295-366.
    7. Daron Acemoglu & Philippe Aghion & Claire Lelarge & John Van Reenen & Fabrizio Zilibotti, 2007. "Technology, Information, and the Decentralization of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1759-1799.
    8. Hanushek, Eric A. & Link, Susanne & Woessmann, Ludger, 2013. "Does school autonomy make sense everywhere? Panel estimates from PISA," Journal of Development Economics, Elsevier, vol. 104(C), pages 212-232.
    9. Zhangkai Huang & Lixing Li & Guangrong Ma & Lixin Colin Xu, 2017. "Hayek, Local Information, and Commanding Heights: Decentralizing State-Owned Enterprises in China," American Economic Review, American Economic Association, vol. 107(8), pages 2455-2478, August.
    10. Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, April.
    11. Laura Alfaro & Anusha Chari, 2009. "India Transformed? Insights from the Firm Level 1988-2005," NBER Working Papers 15448, National Bureau of Economic Research, Inc.
    12. Audinga Baltrunaite & Cristina Giorgiantonio & Sauro Mocetti & Tommaso Orlando, 2021. "Discretion and Supplier Selection in Public Procurement," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 37(1), pages 134-166.
    13. Damon Clark, 2009. "The Performance and Competitive Effects of School Autonomy," Journal of Political Economy, University of Chicago Press, vol. 117(4), pages 745-783, August.
    14. Barberis, Nicholas & Maxim Boycko & Andrei Shleifer & Natalia Tsukanova, 1996. "How Does Privatization Work? Evidence from the Russian Shops," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 764-790, August.
    15. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    16. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-319, March.
    17. Ghazala Azmat & Alan Manning & John Van Reenen, 2012. "Privatization and the Decline of Labour's Share: International Evidence from Network Industries," Economica, London School of Economics and Political Science, vol. 79(315), pages 470-492, July.
    18. Theodore Groves & Yongmiao Hong & John McMillan & Barry Naughton, 1994. "Autonomy and Incentives in Chinese State Enterprises," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(1), pages 183-209.
    19. Prithwiraj Choudhury & Tarun Khanna, 2014. "Toward resource independence – Why state-owned entities become multinationals: An empirical study of India’s public R&D laboratories," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(8), pages 943-960, October.
    20. Lixin Colin Xu, 2000. "Control, Incentives and Competition: The Impact of Reform on Chinese State‐owned Enterprises," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(1), pages 151-173, March.
    21. Chang-Tai Hsieh & Zheng (Michael) Song, 2015. "Grasp the Large, Let Go of the Small: The Transformation of the State Sector in China," NBER Working Papers 21006, National Bureau of Economic Research, Inc.
    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. Sauro Mocetti & Giacomo Roma, 2020. "From 8,000 to 1,000? Rationalization and governance of Italian Government-owned enterprises," Questioni di Economia e Finanza (Occasional Papers) 570, Bank of Italy, Economic Research and International Relations Area.

    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. Fang, Hanming & Hou, Linke & Liu, Mingxing & Xu, Lixin Colin & Zhang, Pengfei, 2023. "Political survival, local accountability, and long-term development: Evidence from an authoritarian country," Journal of Comparative Economics, Elsevier, vol. 51(1), pages 15-40.
    2. Goodell, John & Li, Mingsheng & Liu, Desheng, 2021. "Price informativeness and state-owned enterprises: Considering their heterogeneity," International Review of Financial Analysis, Elsevier, vol. 76(C).
    3. Xu, Cheng-Gang & Gan, Jie & Guo, Yan, 2015. "China?s Decentralized Privatization and Change of Control Rights," CEPR Discussion Papers 10331, C.E.P.R. Discussion Papers.
    4. Voszka, Éva, 2020. "Állami vagy magántulajdon? Adalékok egy dichotómia értelmezéséhez [Public or private ownership? Some remarks on the interpretation of a dichotomy]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1193-1216.
    5. Zhang, Shijin & Zhang, Weiwei & Chen, Fu & Guo, Bingxin, 2023. "Does the mixed-ownership reform of Chinese state-owned enterprises improves their total factor productivity?," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    6. Pan, Xia & Cheng, Wenyin & Gao, Yuning, 2022. "The impact of privatization of state-owned enterprises on innovation in China: A tale of privatization degree," Technovation, Elsevier, vol. 118(C).
    7. Francesco D'Acunto & Michael Weber & Jin Xie & Michael Weber, 2019. "Punish One, Teach A Hundred: The Sobering Effect of Punishment on the Unpunished," CESifo Working Paper Series 7512, CESifo.
    8. Wang, Xun & Yu, Jingwen, 2023. "COVID-19 pandemic and corporate liquidity: The role of SOEs’ trade credit response," Journal of International Money and Finance, Elsevier, vol. 137(C).
    9. Lixin Colin Xu & Tian Zhu & Yi‐min Lin, 2005. "Politician control, agency problems and ownership reform," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 1-24, January.
    10. Daniel Berkowitz & Hong Ma & Shuichiro Nishioka, 2017. "Recasting the Iron Rice Bowl: The Reform of China's State-Owned Enterprises," The Review of Economics and Statistics, MIT Press, vol. 99(4), pages 735-747, July.
    11. Li, Wencong & Yang, Xingquan & Yin, Xingqiang, 2022. "Non-state shareholders entering of state-owned enterprises and equity mispricing: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 84(C).
    12. Li, Zhaohua & Yamada, Takeshi, 2015. "Political and economic incentives of government in partial privatization," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 169-189.
    13. Le, Manh-Duc & Pieri, Fabio & Zaninotto, Enrico, 2019. "From central planning towards a market economy: The role of ownership and competition in Vietnamese firms’ productivity," Journal of Comparative Economics, Elsevier, vol. 47(3), pages 693-716.
    14. Daniel Berkowitz, 2018. "Market Distortions and Labor Share Distributions: Evidence from Chinese Manufacturing Firms," Working Paper 6466, Department of Economics, University of Pittsburgh.
    15. Haichao Fan & Cui Hu & Faqin Lin & Huanhuan Wang, 2022. "Trade liberalization and decentralization of state‐owned enterprises: Evidence from China," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 224-246, January.
    16. Walheer, Barnabé & He, Ming, 2020. "Technical efficiency and technology gap of the manufacturing industry in China: Does firm ownership matter?," World Development, Elsevier, vol. 127(C).
    17. Asatryan, Zareh & Heinemann, Friedrich & Nover, Justus, 2022. "The other government: State-owned enterprises in Germany and their implications for the core public sector," ZEW Expert Briefs 22-08, ZEW - Leibniz Centre for European Economic Research.
    18. Chen, Gongmeng & Firth, Michael & Rui, Oliver, 2006. "Have China's enterprise reforms led to improved efficiency and profitability?," Emerging Markets Review, Elsevier, vol. 7(1), pages 82-109, March.
    19. Johansson, Anders C. & Luo, Danglun & Rickne, Johanna & Zheng, Wei, 2017. "Government intervention in the capital allocation process: Excess employment as an IPO selection rule in China," China Economic Review, Elsevier, vol. 44(C), pages 271-281.
    20. Yuyu Chen & Mitsuru Igami & Masayuki Sawada & Mo Xiao, 2021. "Privatization and productivity in China," RAND Journal of Economics, RAND Corporation, vol. 52(4), pages 884-916, December.

    More about this item

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:nbr:nberwo:26304. 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: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.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.