Organizational Beliefs and Managerial Vision

Abstract

This paper studies, in a world with differing priors, the role of organizational beliefs and managerial vision in the behavior and performance of corporations.

The paper defines vision operationally as a very strong belief by the manager about the right course of action for the firm. The interaction between employees' beliefs and the manager's vision influences decisions and determines employees' motivation and satisfaction. Through sorting in the labor market, the manager's vision also shapes organizational beliefs. Under weak conditions, a company's board should select a manager with stronger beliefs than its own, although spurious effects may make vision often look better than it really is.

The analysis shows that beliefs play an important role that goes beyond their information content. It also has implications for theories of corporate culture and business strategy.

Keywords: vision, organizational beliefs, culture, heterogeneous priors, differing priors

JEL Classification: D21, D80, J30, J41, L22, M10, M12, M14