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Competition and managerial autonomy
Author(s) -
Ruzzier Christian A.
Publication year - 2018
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2941
Subject(s) - competition (biology) , profit maximization , autonomy , profit (economics) , microeconomics , business , principal (computer security) , industrial organization , position (finance) , maximization , affect (linguistics) , economics , finance , political science , computer science , psychology , ecology , communication , law , biology , operating system
I formalize and challenge the idea that competition forces managers to make better choices, thus favoring managerial autonomy in decision making. If managers care about keeping their position or avoiding interference, and they can make strategic choices that affect both expected firm profits and their riskiness, even if competition at first pushes the manager towards profit maximization, further increases in competition might lead him to take excessive risks. To curb this possibility, the principal owner optimally reduces the degree of autonomy granted to the manager. Hence, higher levels of managerial autonomy are more likely for intermediate levels of competition.