'Tying the Manager's Hands': Constraining Opportunistic Managerial Intervention

Posted: 29 Feb 2008

See all articles by Kirsten Foss

Kirsten Foss

Copenhagen Business School - Department of Industrial Economics & Strategy (IVS)

Nicolai J. Foss

Copenhagen Business School - Department of Strategy and Innovation

Xosé H. Vázquez

Universidade de Vigo

Date Written: September 2006

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.

Keywords: Delegation of discretion, Employee motivation, Firm performance, Managerial intervention

Suggested Citation

Foss, Kirsten and Foss, Nicolai J. and Vázquez, Xosé H., 'Tying the Manager's Hands': Constraining Opportunistic Managerial Intervention (September 2006). Cambridge Journal of Economics, Vol. 30, Issue 5, pp. 797-818, 2006, Available at SSRN: https://ssrn.com/abstract=1096811 or http://dx.doi.org/10.1093/cje/bei107

Kirsten Foss (Contact Author)

Copenhagen Business School - Department of Industrial Economics & Strategy (IVS) ( email )

Howitzvej 60, 6
Frederiksberg, DK-2000
Denmark

Nicolai J. Foss

Copenhagen Business School - Department of Strategy and Innovation ( email )

Kilen
Frederiksberg, 2000
Denmark

Xosé H. Vázquez

Universidade de Vigo ( email )

ECOBAS (Economics and Business Admon. for Society)
Rúa Leonardo da Vinci s/n
Vigo, Pontevedra 36310
Spain
630423117 (Phone)

HOME PAGE: http://ecobas.webs.uvigo.es/

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