Interpersonal Authority in a Theory of the Firm
Van den Steen, Eric. 2010. "Interpersonal Authority in a Theory of the Firm."
American Economic Review,
This paper develops a theory of the firm in which a firm's centralized asset
ownership and low-powered incentives give the manager, as an equilibrium
outcome, interpersonal authority over employees (in a world with open disagreement).
The paper thus provides micro-foundations for the idea that bringing
a project inside the firm gives the manager control over that project, while
explaining concentrated asset ownership, low-powered incentives, and centralized
authority as typical characteristics of firms. The paper also leads to new
perspectives on the firm as a legal entity and on the relationship between the
Knightian and Coasian views of the firm. (JEL D23, L20)
Article Full-Text Access
Van den Steen, Eric (Harvard U)
D23: Organizational Behavior; Transaction Costs; Property Rights
L20: Firm Objectives, Organization, and Behavior: General