The Dynamic Value of Hierarchy

Authors:
Anne Marie Knott
Affiliations:
-
Venue:
Management Science
Year:
2001

Citing 0
Cited 10

Competitive Implications of Interfirm Mobility

Organization Science
An Empirical Analysis of Territorial Encroachment Within Franchised and Company-Owned Branded Chains

Marketing Science
The Persistence of Flexible Organizational Routines: The Role of Agency and Organizational Context

Organization Science
Turnover Events, Vicarious Information, and the Reduced Likelihood of Outlet-Level Exit Among Small Multiunit Organizations

Organization Science
Competitive Implications of Interfirm Mobility

Organization Science
Organizational Learning: From Experience to Knowledge

Organization Science
Reproducing Knowledge: Inaccurate Replication and Failure in Franchise Organizations

Organization Science
Learning, Imitation, and the Use of Knowledge: A Comparison of Markets, Hierarchies, and Teams

Organization Science
Creative Projects: A Less Routine Approach Toward Getting New Things Done

Organization Science
Decay, Shock, and Renewal: Operational Routines and Process Entropy in the Pharmaceutical Industry

Organization Science

Quantified Score

Hi-index	0.01

Visualization

Abstract

This study develops a dual-routines view of the dynamic value of hierarchy, and tests it against the implicit null hypothesis that hierarchy merely provides static advantages over markets. The view holds that hierarchical managers perform two roles that create value for firms in perpetuity--an administrative role of enforcing operational routine, and an entrepreneurial role of executing a metaroutine that continually revises operational routine to keep pace with changes in the environment. The test consists of a natural experiment comparing the behavior and performance of establishments that leave a franchise, "lose their hierarchical managers," with those that remain.I find support for the view. In the absence of the franchisor, establishment behavior drifts from the operational routine, and establishments fail to adopt innovation. Both responses lead to significant decay in performance. Thus hierarchical managers are necessary to actively enforce routine,even after the routine been assimilated, and to introduce innovation,even in this unique setting of perfect incentives.