Authors: Harvey Leibenstein
ISBN-13: 9781583485309, ISBN-10: 1583485309
Format: Paperback
Publisher: iUniverse, Incorporated
Date Published: March 2000
Edition: (Non-applicable)
Why are most businesses less efficient that they could be? Why do two identical Ford plants in England and Germany, manufacturing identical cars, have vastly different rates of production?
Harvey Leibenstein explores such questions in depth, using ideas and evidence from economics, game theory, psychology, and other disciplines. He observes that employees usually perform best when they work under a moderate amount of pressure - not too little and not too much. But this sort of balanced situation is rare, so most workers in low-pressure situations may shirk their tasks, while those in a stressful environment may cave in.
To avoid this state of affairs, Leibenstein argues, workers tacitly adopt conventions about proper degrees of effort. The history of the firm, the degree of hierarchy, and the nature of the competitive relationships within the firm largely govern these standards, which frequently defy rational considerations. Leibenstein analyzes the structure and functioning of companies with multiple levels of hierarchy, pinpointing sources of inefficiency. He also examines the question of entrepreneurship.
Leibenstein, an economist, looks at internal inefficiency in firms and what can be done about it. He ``examines how the behavior of firm members differs when firms are sheltered from the rigors of competition'' by looking at conventions about acceptable levels of effort, employment relations, and hierarchical structures that produce inefficiency. The result is a model explicated by a series of graphs. This book will probably create as much comment as his earlier Beyond Economic Man. However, without a background in economics, the reader could find the language difficult. Recommended for comprehensive business collections. Michael D. Kathman, St. John's Univ. Lib., Collegeville, Minn.
1. | Organization and the Procedural Perspective | 1 |
The Procedural Perspective | 6 | |
The Connections of the Various Components of the Book | 9 | |
2. | Decision Occurrences | 11 |
The Inner Preference Set | 12 | |
Decision Procedures | 13 | |
Approximate Maximizing Procedures | 15 | |
Are Noncalculating Procedures Optimal? | 16 | |
The Yerkes-Dodson Law and Decision Procedures | 18 | |
The Emotion Spillover Theory of Decision Making | 20 | |
Inert Areas and Procedural Decisions | 22 | |
The Employment Contract and Commitment Decisions | 22 | |
Summary and Conclusions | 24 | |
3. | On the Anatomy of Decisions | 26 |
Decision Triggers and Finalizations | 26 | |
Options, Selection Rules, and Search Processes | 28 | |
Notes on Procedures and Procedure Sets | 32 | |
Conclusions | 33 | |
4. | Economics of Inertia | 35 |
Modeling Inertial Frames | 37 | |
Some Consequences of Inertia | 41 | |
5. | Productivity: The Hidden Prisoner's Dilemma Analysis | 43 |
Self-Interest and Trust: The Prisoner's Dilemma Example | 44 | |
The Productivity Problem in the Prisoner's Dilemma Framework | 48 | |
Peer Group and Golden-Rule Standards | 52 | |
The Twofold Prisoner's Dilemma Problem | 57 | |
Summary and Conclusions | 58 | |
6. | Conventions, Coordination, and Decisions | 60 |
The Theory of Conventions | 62 | |
Conventions as a Formalism | 66 | |
Does a Convention Have to Be Optimal? | 71 | |
Summary and Conclusions | 75 | |
7. | Conventions as a Solution to the Intrafirm Prisoner's Dilemma Problem | 77 |
The Effort Convention | 79 | |
Working Conditions and Wages | 86 | |
Wages: Convention or Negotiation? | 91 | |
On the Stability of Conventions | 95 | |
Summary and Conclusions | 96 | |
8. | Intrafirm Effort Decisions: Monitoring and Sanctions | 98 |
The Voluntarily Motivated Effort Hypothesis | 99 | |
Hierarchical Sanctions | 102 | |
Peer Sanctions and Sanction Levels | 107 | |
Sanctions and Nonmaximizing Behavior | 114 | |
Concluding Remarks | 115 | |
9. | Equilibrium, Entrepreneurship, and Inertia | 116 |
Equilibrium and Quasi-Equilibrium | 117 | |
What Do Entrepreneurs Do? | 118 | |
The Supply of Entrepreneurs and n Achievement Theory | 120 | |
Behavior of Firms under Loose Equilibrium | 121 | |
Summary and Conclusions | 125 | |
10. | An Implications Sampler | 127 |
Summary of Basic Postulates | 129 | |
Effort Convention Implications | 130 | |
Firm-Level Implications | 131 | |
11. | The Power of Hierarchy | 135 |
The Power and Size of Hierarchy | 140 | |
The Israeli Kibbutz: Size and Hierarchy | 144 | |
The Hierarchical Solution to the Size Problem | 146 | |
12. | Specialization, Hierarchy, and Internal Inefficiency | 150 |
Specialization, Effort, and Motivation | 151 | |
Process Cuts, Specialization, and Recombinings | 154 | |
Related Invisible "Cutouts" | 158 | |
Hierarchical Levels, Distance, and Separations | 160 | |
Controls, Incentives, and Motivations under Hierarchies | 161 | |
Motivational Interdependencies and Hierarchy | 164 | |
Vertical Groups | 166 | |
The Commitment Network | 169 | |
Internal Entrepreneurship and the Commitment Network | 172 | |
Factionalism | 173 | |
Autonomous Internal Organizations | 174 | |
Summary | 174 | |
13. | On Japanese Ethos, Culture, and Management | 177 |
Borrowing | 179 | |
More on Confucianism | 182 | |
The Social Anthropology Approach | 185 | |
The Theory of Amae | 192 | |
Summary | 196 | |
14. | Japanese and Western Management Systems: The Contrasts | 199 |
The Career Elements of the JMS | 201 | |
Lifetime Employment Ideal | 203 | |
Jobs, Training, and Unions | 208 | |
The Japanese Payment and Bonus System | 212 | |
Community, Authority, and Consensus | 213 | |
The Industrial Group | 215 | |
Summary and Conclusions | 216 | |
15. | Putting It All Together | 220 |
The Basic Model | 220 | |
Pressure, Hierarchy, and Effort | 222 | |
A Diagrammatic Treatment of the Model | 231 | |
Sources of Inefficiency | 234 | |
Efficiency Wages | 238 | |
Some Concluding Remarks | 241 | |
Appendix | Language, Choice, and Nonoptimization | 245 |
Comparative Language Problems | 248 | |
Ex Ante versus Ex Post Arguments | 249 | |
The Revealed Preference Case | 251 | |
On Objective Function Misspecifications | 252 | |
Are Nonoptimal Choices Always Translatable? | 254 | |
The Disutility of Maximization | 255 | |
Inertia, Inert Areas, and Utility | 258 | |
Decision Making: Individuals versus Groups | 261 | |
Language and the Concept of Technical Inefficiency | 261 | |
Summary | 262 | |
References | 263 | |
Index | 273 |