The Problems and Promise of Hierarchy: Voice Rights and the Firm

69 Pages Posted: 13 Nov 2014

See all articles by Robert Freeland

Robert Freeland

University of Wisconsin - Madison

Ezra W. Zuckerman

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: November 11, 2014

Abstract

The firm’s dominance of the contemporary “knowledge economy” is puzzling given that (a) the firm is intrinsically hierarchical; (b) hierarchical control tends to undercut a worker’s identification with her work; (c) performance tends to be perfunctory when such identification is low; and (d) some firms nonetheless succeed at eliciting strong identification and consummate performance. Our theory integrates various streams of work to help resolve this puzzle. Three main claims are made. First, the firm is a legal rights hierarchy, with management always retaining classic “fiat” rights (to determine how work will be done and by whom), as well as voice rights (who can speak within and on behalf of the firm). Second, control of voice is crucial for endowing the firm with its unique capacity for being a reliable and accountable actor. Third, control of voice gives the firm three necessary (if insufficient) ingredients - to shape the definition of the situation; to broadcast consistent messages about its identity; and to make clear and credible commitments to suppress hierarchy - for eliciting strong identification with the collective enterprise. Our theory thus suggests why firms are ubiquitous and why they range from cases that are marked by alienation and perfunctory performance to cases of strong identification and consummate performance.

Keywords: theory of the firm, hierarchy, incentives, voice rights, reliability, accountability

Suggested Citation

Freeland, Robert and Zuckerman Sivan, Ezra W., The Problems and Promise of Hierarchy: Voice Rights and the Firm (November 11, 2014). Available at SSRN: https://ssrn.com/abstract=2523245

Robert Freeland

University of Wisconsin - Madison ( email )

Department of Sociology
1180 Observatory Drive
Madison, WI 53706
United States

Ezra W. Zuckerman Sivan (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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