Benevolent Deception! An Investigation of the Mechanisms Underlying Failed Commitments in Organizations

Strategic Management Society (SMS) 2013 Annual Meeting, Atlanta, Georgia, USA.

30 Pages Posted: 19 Dec 2014 Last revised: 23 Dec 2014

See all articles by M. Amin Zargarzadeh

M. Amin Zargarzadeh

University of Calgary - Haskayne School of Business

Hannes Luc Leroy

KU Leuven

Date Written: October 1, 2013

Abstract

Transaction Cost Economics (TCE) as developed by Williamson, builds upon two behavioral assumptions: bounded rationality and opportunism. TCE studies governance mechanisms that “organize transactions so as to economize on bounded rationality while simultaneously safeguarding them against the hazards of opportunism” (Williamson, 1996: 254). There exist, however, extensive debates on the validity of opportunism assumption. The critics argue that the assumption of opportunism is overemphasized in TCE. Trying to represent more comprehensively the reasons for failed commitments, Verbeke and Greidanus (2009) propose the envelope concept of bounded reliability (BRel) as a substitute for the conventional TCE assumption of opportunism. Verbeke and Greidanus identified two main components for bounded reliability: (1) opportunism as intentional deceit and (2) benevolent preference reversal. In this paper we analyze 29 case studies which describe various aspects of the internal mechanisms of General Electric (GE) Company. We investigate mechanisms underlying failed commitments and the safeguards against the potential for such failures in General Electric. Based on our findings, we propose a new dimension for bounded reliability, called benevolent deception (benevolent information distortion). Our results also indicate a number of governance mechanisms used by GE as safeguards to avoid or mitigate potential failed commitments.

Keywords: transaction cost economics, opportunism, bounded reliability, internalization theory, General Electric

JEL Classification: D23, C91

Suggested Citation

Zargarzadeh, M. Amin and Leroy, Hannes Luc, Benevolent Deception! An Investigation of the Mechanisms Underlying Failed Commitments in Organizations (October 1, 2013). Strategic Management Society (SMS) 2013 Annual Meeting, Atlanta, Georgia, USA.. Available at SSRN: https://ssrn.com/abstract=2538897

M. Amin Zargarzadeh

University of Calgary - Haskayne School of Business ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

Hannes Luc Leroy (Contact Author)

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

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