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The Impacts of Managerial Autonomy on Firm Outcomes

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  • 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.

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  • 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
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    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.

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    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

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