Tag Archives | Theory of the Firm

The Problems and Promise of Hierarchy: Voice Rights and the Firm

Robert F. Freeland, Ezra W. Zuckerman Sivan

Sociological Science, March 5, 2018
DOI 10.15195/v5.a7

The firm’s continued importance for coordinating economic activity is puzzling given that (1) economists have not demonstrated that the greater alignment of effort they expect from hierarchical coordination overcomes the reduction in employee effort created by “low-powered” incentives, (2) employee effort is further threatened by the alienating effects of hierarchical control, and (3) firms, as we show, are necessarily hierarchical. Why, then, do firms dominate the capitalist economy? Our theory is rooted in a more subtle set of rights that is also intrinsic to the firm hierarchy: “voice rights” (who can speak within and on behalf of the firm). Control of voice is crucial for endowing the firm with a capacity that cannot be acquired by a mere “nexus” of contractors: it can become a reliable and accountable actor. This, in turn, gives the firm three necessary (if insufficient) ingredients for creating strong identification with the collective enterprise. Our theory thus suggests why firms remain important despite their inherent limitations and why some firms are marked by alienation and perfunctory performance while others are marked by strong identification and consummate performance.

Creative Commons LicenseThis work is licensed under a Creative Commons Attribution 4.0 International License.

Robert F. Freeland: Department of Sociology, University of Wisconsin-Madison
Email: freeland@ssc.wisc.edu

Ezra W. Zuckerman Sivan: Sloan School of Management, Massachusetts Institute of Technology
Email: ewzucker@mit.edu

Acknowledgements: We are grateful for feedback from the following conference and seminar audiences: ESSEC Business School (2011), the American Sociological Association (2012), the Saïd Business School (2014), the Institute for Advanced Study in Toulouse (2012), and the Economic Sociology Working Group (2012), the IWER Seminar (2013), and the MIT-Harvard Economic Sociology Seminar. We have also benefited from help, advice, and feedback from Matthew Bidwell, Rodrigo Canales, Phech Colatat, Gabriella Coleman, Frank Dobbin, Bob Gibbons, Sandy Jacoby, Ethan Mollick, Woody Powell, Tom Kochan, Kieran Healy, Pam Oliver, Paul Osterman, Jeff Pfeffer, Mike Piore, Hiram Samel, Mike Sauder, Cat Turco, Eric van den Steen, and Nate Wilmers. The usual disclaimers apply.

  • Citation: Freeland, Robert F., and Ezra W. Zuckerman Sivan. 2018. “The Problems and Promise of Hierarchy: Voice Rights and the Firm.” Sociological Science 5: 143-181.
  • Received: July 15, 2017
  • Accepted: January 7, 2018
  • Editors: Jesper Sørensen, Gabriel Rossman
  • DOI: 10.15195/v5.a7

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