Managerial delegation games and corporate social responsibility

In a duopoly in which firms universally engage in corporate social responsibility (CSR) activities, this paper shows that, in contrast to the main tenet of the received managerial delegation literature, if the CSR sensitivity is sufficiently high: (a) when both firms delegate output decisions to managers, at the equilibrium profit (resp. consumer welfare) is higher (resp. lower) than when firms are pure CSR; (b) in a managerial delegation game, asymmetric multiple subgame perfect Nash equilibria emerge in which one firm delegates and the rival does not. These results hold under both the “sales delegation” and “relative profits” manager's bonus schemes.     

The Bargaining–sales‐delegation Game

This article revisits the managerial delegation literature led by Vickers ( 1985 ), Fershtman and Judd ( 1987 ) and Sklivas ( 1987 ) by introducing a bargaining mechanism between owners and managers over managerial contracts. It shows that the degree of bargaining interacts with the extent of product differentiation in determining whether the sub‐game perfect Nash equilibrium is sales delegation or profit maximisation. In contrast with the classical result, no sales delegation emerges and the typical prisoner's dilemma of the managerial delegation literature is solved. This holds in both contexts of Cournot and Bertrand rivalries. The article also provides results for the more general cases with heterogeneous managerial bargaining power and endogenous decisions of the owners regarding the bargaining power of the manager that should be or not be hired in a firm. Copyright © 2016 John Wiley & Sons, Ltd.     

Bargaining over Managerial Contracts in Delegation Games: The Generalized Oligopolistic Case

The main purpose of this paper is to disclose the properties of the equilibrium outcomes in the differentiated‐products model with two stages: (i) owner‐shareholders negotiate managerial compensation with their managers that comprises their profits and sales (sales delegation) and (ii) they engage in their market competition. The other purpose of this paper is to study the differentiated goods model in which an owner bargains the managerial compensation with her/his manager that comprises her/his profit and her/his rival's profit (relative performance delegation). We further investigate the situation wherein the firm with sales delegation and the firm with the relative performance delegation coexist. Copyright © 2012 John Wiley & Sons, Ltd.     

Managerial Delegation Contracts under Centralized Unionization

This paper studies how alternative managerial delegation contracts in a duopoly product market interact with wage decisions taken by a central (industry‐wide) union in the labor market. Interestingly, results prove to be more varied with respect to findings by the managerial delegation literature with exogenous production costs. Most notably, it is pointed out that, in equilibrium, both firm profitability and welfare outcomes can be superior under both sales delegation and relative profit delegation, depending on various factors such as the degree of product differentiation and the competition regime. Copyright © 2013 John Wiley & Sons, Ltd.     

The strategic use of managerial incentives in a non‐profit firm mixed duopoly

A mixed duopoly setting is examined where a private non‐profit firm (NPO) competes with a private profit‐maximizer. The NPO's stakeholders select a contract for their managers. A novel NPO objective function is utilized which takes into account all the likely returns to the NPO's stakeholders (NPO profits and the surplus accruing to the NPO stakeholders) in such a commercial setting. In sub‐game perfect equilibria, it is shown that the NPO's managers generally will not be given the NPO's true objective to optimize. It is also shown that aggregate social welfare may increase or decrease due to this managerial contracting behavior or the use of NPO membership fees. Copyright © 2007 John Wiley & Sons, Ltd.     

A Note on Managerial Delegation with Asymmetric and Convex Costs

In this note, we investigate if the standard result by the managerial delegation literature, i.e., the sub‐game perfect Nash equilibrium is not Pareto‐optimal from the firms' viewpoint, still applies when asymmetric and convex costs are introduced into the analysis. In such a framework, the managerial delegation choice still represents a sub‐game Nash perfect equilibrium, but the more efficient firm may obtain higher profits provided that the degree of cost asymmetry between firms is sufficiently large. Copyright © 2015 John Wiley & Sons, Ltd.     

Should managerial delegation contracts be made before or after union wage setting? A game‐theoretic analysis

This paper analyzes a multiple‐stage game in which, at the final stage, two (managerial) firms compete over quantities in the product market. Prior to this stage, firm‐specific unions set the workers' wages, while the owners of both firms hire managers and provide them with incentive contracts. Owners can freely decide to arrange the managerial contract before or after the (non‐managerial) wage determination stage. Hence, the endogenous choice of the incentive contract stage is derived. The possibility of multiple equilibria arises, where both owners choose managerial contracts before or after unions' wage setting, crucially depending on unions' preferences. Such results also prove to be true for a remarkable degree of asymmetry in preferences over wages vis‐à‐vis employment across unions.     

Discriminatory input pricing and strategic delegation

This paper examines how discriminatory input pricing by an upstream monopolist affects the incentives that owners of downstream duopolists offer their managers. Regardless of the mode of competition (quantity or price), owners of downstream firms induce their managers to be more profit‐oriented and to behave less aggressively when the monopolist is allowed to price‐discriminate than when he charges a uniform price. If the monopolist price‐discriminates, managerial downstream firms always earn more than owner‐managed profit‐maximizing firms. However, if the monopolist charges a uniform price, managerial downstream firms earn more than profit‐maximizing counterparts under price competition and earn less under quantity competition. Copyright © 2009 John Wiley & Sons, Ltd.     

Strategic trade policy with bargaining over managerial contracts

This paper re‐examines the well‐known activist regime's inefficiency (governments set export subsidies) in a sales–delegation game with owner–manager bargaining over contracts. Contrary to the received literature, this bargaining process may (a) induce governments to set a tax if products are not too substitute or complements and (b) lead to an efficient (inefficient) equilibrium provided that products are sufficiently differentiated (not too complements). Therefore, unilateral public intervention can be optimal: in case of rival governments' retaliation, under appropriate product competition degrees, welfares are larger than under free trade even for small managers' power. Thus, managerial delegation practices are crucial also for international trade issues.     

Tacit Collusion in a One‐Shot Game of Price Competition with Soft Capacity Constraints

This paper analyzes price competition in the case of two firms operating under constant returns to scale with more than one production factor. Factors are chosen sequentially in a two‐stage game generating a soft capacity constraint and implying a convex short‐term cost function in the second stage of the game. We show that tacit collusion is the only predictable result of the whole game, that is, the unique payoff‐dominant pure strategy Nash equilibrium. Technically, this paper bridges the capacity constraint literature on price competition and that of the convex cost function.     

Delegation and Incentives under Evolutionarily Stable Conjectures

Existing results show that in a homogenous Cournot duopoly, commitment by delegation harms profit. This conclusion presupposes that market conduct is the same whether incentives are aggressive or accommodating. We study delegation and incentives under evolutionarily stable conjectures and show how performance pay co‐determines market conduct. In fact, in equilibrium with evolutionarily stable conjectures, we show that commitment through delegation leads to a profit increase. Manipulation of managerial incentives produces less competition and therefore benefits firms' owners even in symmetric homogenous oligopoly. Copyright © 2016 John Wiley & Sons, Ltd.     

Strategic Delegation and Vertical Integration

This paper proposes a game‐theoretic model to analyze owners' vertical integration choices if they delegate pricing decisions to their managers. We find that all three vertical structures are possible Nash equilibrium outcomes. If the products are weak substitutes, then the outcome is that both owners adopt vertical integration. When the products are close substitutes, both owners adopt vertical separation in equilibrium. When substitution between the products is medium, the coexistence of vertical integration and vertical separation is the equilibrium outcome, and the owner corresponding to vertical separation offers exactly a profit‐maximization contract to his or her manager under this situation. Copyright © 2014 John Wiley & Sons, Ltd.     

Managerial coaching and subordinates' workplace well‐being: A moderated mediation study

Taking a self‐categorisation perspective, we predict that managerial coaching affects subordinates' workplace well‐being through perceived insider status and that Chinese traditionality moderates this indirect effect. To test these hypotheses, we designed a three‐stage research method to collect data from 276 subordinates in a large state‐owned enterprise located in Shanghai, China. Results indicated that (a) managerial coaching was positively related to subordinates' workplace well‐being; (b) perceived insider status mediated the linkage between managerial coaching and subordinates' workplace well‐being; and (c) Chinese traditionality moderated the indirect relationship between managerial coaching and subordinates' workplace well‐being via perceived insider status, such that the indirect effect was stronger for subordinates with low rather than high Chinese traditionality. This study sheds new light on the intervening process (i.e., perceived insider status) that explains how managerial coaching influences subordinates' workplace well‐being. The findings also extend the current literature by adding a substantive moderator (i.e., Chinese traditionality) to explain when and why subordinates increase their well‐being when faced with managerial coaching.     

Product market objectives and the formation of research joint ventures

In this paper we extend the existing literature on research and development (R&D) investments and research joint ventures (RJVs) in two important ways. First, we analyze and compare the case where firms collude in the product market to the benchmark case of competition in the output market. Second, we allow firms to form coalitions endogenously as a separate stage in the game. We develop profit functions that depend on the partition of firms into joint ventures and the nature of product competition between venture partners. Our results illustrate the restrictive nature of some assumptions made in the literature. Typically multiple RJVs of different sizes form in equilibrium. In general, RJVs should not be promoted if they entail product market collusion. Given the information available to policy‐makers, it is unlikely that an R&D policy more refined than analyzing and allowing RJVs on a case‐by‐case basis is feasible. Copyright © 1999 John Wiley & Sons, Ltd.     

What does the future hold for giving? An approach using the social representations of Generation Y

• Nowadays, not‐for‐profit organizations and charities face the ageing of donors and a growing debate over monetary donation collection methods. They need to find solutions to attract younger generations of donors. Could this be done using the same methods applied to older generations? This present research investigates social representations (SRs) of giving by younger generations to understand how not‐for‐profit organizations and charities should approach them. The study focuses on SRs of a French sample of 276 individuals from Generation Y born between 1979 and 1991. It uses the free association technique. The results show paradoxical representations of giving. Institutionalization of giving is salient as representation of it as a freely consenting act. The paradox relies also in the strong presence of a relationship with others that parallels the gift as an individualistic choice.
• Generation Y individuals appear to be sociable, yet they evoke more sharing and solidarity than charity. Institutionalized forms of giving, particularly via charities and not‐for‐profit organizations, are rejected. These individuals seem to express their individuality through practices that resemble sharing rather than giving. From a managerial point of view, these results shed light on the factors liable to cause members of this generation to give, such as (i) the use of social networks, (ii) appealing to pleasure, festivities and efficiency rather than to guilt and duty, and (iii) encouragement to “work within the not‐for‐profit organization”.

Copyright © 2012 John Wiley & Sons, Ltd.     

Information Technology and the Organization of Firms

This paper seeks to understand why improved information technology (IT) might strengthen the case for decentralization, as recent empirical work suggests. We study a firm with a headquarters and two managers, each of whom gathers information about her changing local environment. The firm earns a gross profit that depends on actions taken as well as the current local environments. More information permits better actions, and information‐gathering costs drop as IT improves. When the firm is centralized, information‐gathering expenditures are first best, but after the firm decentralizes, each manager becomes a self‐interested player of a “sharing game” in which she collects a share of gross profit and bears the cost of her chosen information‐gathering activities. The firm's actions are determined by the information gathered at the equilibria of the game. As a result, the firm experiences a decentralization penalty, namely the change in net profit (gross profit minus informational costs) after decentralizing. If the penalty is small, then it is outweighed by the advantages of decentralizing—the vanishing of monitoring costs and perhaps the improved motivation of a decentralized manager's staff. To gather information a manager chooses (once and for all) a partitioning of her possible local environments and then searches to find the set in which her current environment lies. Our main measure of a manager's information cost is a technology parameter, θ, times the number of sets in her chosen partitioning. A second measure is θ times the partitioning's “Shannon content,” which may be interpreted as average search time when search is efficient. We ask whether improved IT, i.e., a drop in θ, indeed lowers the decentralization penalty. We obtain a strongly affirmative answer to this question for both cost measures in a class of examples and a mixed answer when we generalize so as to preserve some of the key properties of those examples. In a parallel manner we explore another conjecture suggested in the empirical literature, namely that better IT raises the coordination benefit, which we define as the increase in net profit when the firm bases its actions on pooled information, rather than letting each action variable depend on the information gathered by just one manager.     

Corporate plant location under uncertainty: Divergence between the interests of ownership and management

This paper expands current knowledge of location decision-making under uncertainty by analyzing instances where the corporate goal of profit maximization diverges from the managerial decision-maker's goal of maximizing personal profit. With illustrations based on alternative decision-making criteria, the paper demonstrates that a corporate manager acting in his own self interest may select a plant site that does not maximize corporate profits. The trend for US corporations to select suburban locations, despite the cost advantages of older urban areas, is illustrative of this divergence between the objectives of ownership and management.     

The Incentives for Innovative Activity in the Managerial Firm

This paper discusses the incentives for innovation by a manager‐led firm. In particular, it is investigated how remuneration practices influence the choice of a risky project. In the first place, a dynamic model with uncertainty is used to determine the optimal employment level with exogenous growth and risk. In the second part of the paper, growth and risk are explained by R&D expenditures. Optimal investment expenditures for R&D are derived for (i) the profit‐maximizing firm and (ii) the managerial firm, where the manager receives a fixed salary as well as a variable share of profits. If risk neutrality is assumed, then no difference exists. However, if risk aversion is considered, the managerial firm will invest more into R&D than the owner‐led company. Size‐related salaries are an additional reason for higher expenditures of R&D by managers. Copyright © 2013 John Wiley & Sons, Ltd.     

The Role of Information in Building Reputation in an Investment/Trust Game

This article analyses the role of information in building reputation in an investment/trust game. The model allows for information asymmetry in a finitely repeated sender–receiver game and solves for sequential equilibrium to show that if there are some trustworthy managers who always disclose their private information and choose to return a fair proportion of the firm's income as dividend to the investor, then a rational manager will mimic such behaviour in an attempt to earn a reputation for being trustworthy. The rational manager will mimic with probability 1 in the early periods of the game. The investor, too, will invest with probability 1 in these periods. However, in the later periods, the rational manager will mimic with a certain probability strictly less than 1. The probability will be such that it will make the investor indifferent between investing and not investing, and he, in turn, will invest with a probability (strictly less than 1) that will make the rational manager indifferent between mimicking and not mimicking; that is, the game will begin with pure-strategy play but will switch to mixed-strategy play. There is one exception, though: when the investor's ex ante beliefs about the manager's trustworthiness are exceptionally high, the game will continue in a pure strategy, and the switch to mixed-strategy play will never occur. Identical results obtain if the manager's choice of whether to share his private information with the investor is replaced by exogenously imposed information sharing.     

PUTTING GIDDENS INTO ACTION: SOCIAL SYSTEMS AND MANAGERIAL AGENCY

This article examines the influence of Anthony Giddens on recent work in management studies, especially the contribution of his structurationist perspective to understanding managerial agency. A citation analysis and discussion of prominent exponents such as Ranson et al. (1980), Andrew Pettigrew and Hugh Willmot, concludes that Giddens’influence is substantial but lopsided. Giddens’concern for the intersection and tension between different social systems has been particularly neglected. Drawing on the insights of current ‘institutionalist’studies of societal influences on organizations, the article builds a structurationist account of managerial agency that is founded on the contradictions within and between different social systems. The article ends by considering the implications of this structurationist account for current concerns with managerial leadership, organizational symbolism and strategic choice.