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sroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. To copy otherwise, to republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. . 2. Thea mount of underprovision of the public good rises a the number of contributors increa2T in the tot a e#ort ca'z but the e#cient a ount of the public good a d the Na sh equilibriumaZZ nt will berela ively consta nta s the number of contributors increa ses. 3. E#cient provision in the best-e#ort technology generax6 involves only theaZC ts with the lowest cost of contributing m a inga ny contributions aaZ= Cornes [1993] builds on Hirshleifer'sa ai sis. In pa6 icula r he ea mines the impa ct of cha nges in income distribution on the equilibriumaZC ca ion. S a dler a d Ha6 ley [2001] providea comprehensive survey of the work on ax lia ces, sta rting with the semina

Infusing hierarchies with elements of market control has become a much-used way of simultaneously increasing entrepreneurialism and motivation in firms. However, this paper argues that such “internal hybrids, ” particularly in their radical forms, are inherently hard to successfully design and implement because of a fundamental incentive problem of establishing credible managerial commitments to not intervene in delegated decision making. This theme is developed and illustrated, using the case of the world-leading hearing aids producer, Oticon. In the beginning of the 1990s, Oticon became famous for its radical internal hybrid, the “spaghetti organization. ” Recent work has interpreted the spaghetti organization as a radical attempt to foster dynamic capabilities by organizational means, neglecting, however, that about a decade later the spaghetti organization has given way to a more traditional matrix organization. In contrast, an organizational economics interpretation of Oticon organizational changes is developed. This lens suggests that a strong liability of the spaghetti organization was the above incentive problem: Frequent managerial meddling with delegated rights led to a severe loss of motivation, and arguably caused the change to a more structured organization. Refutable implications are developed, and the discussion is broadened to more general issues of economic organization.

This paper studies, in a world with differing priors, the role of organizational beliefs and managerial vision in the behavior and performance of corporations. The paper defines vision operationally as a very strong belief by the manager about the right course of action for the firm. The interaction between employees ’ beliefs and the manager’s vision influences decisions and determines employees ’ motivation and satisfaction. Through sorting in the labor market, the manager’s vision also shapes organizational beliefs. Under weak conditions, a company’s board should select a manager with stronger beliefs than its own, although spurious effects may make vision often look better than it really is. The analysis shows that beliefs play an important role that goes beyond their information content. It also has implications for theories of corporate culture and business strategy.

In this paper we study the mechanics of “leading by example ” in teams. Leadership is beneficial for the entire team when agents are conformists, i.e., dislike effort differentials. We also show how leadership can arise endogenously and discuss what type of leader benefits a team most.

There is a large literature on the productivity of universities. Little is known, however, about how different types of leader affect a university’s later performance. To address this, I blend quantitative and qualitative evidence. By constructing a new longitudinal dataset, I find that the research quality of a university improves some years after it appoints a president (vice chancellor) who is an accomplished scholar. To try to explain why scholar-leaders might improve the research performance of their institutions, I draw from interview data with twenty-six heads in universities in the United States and United Kingdom. The findings have policy implications for governments, universities, and a range of research and knowledge-intensive organizations.

Existing economic models of leadership (e.g., Hermalin, 1998) consider leadership in a static setting only. Yet an important phenomenon of leadership is its persistence. One aspect of leadership, for instance, that is unexplorable in a static setting is reputation: The leader develops a reputation for leading her followers well. To allow for reputation effects and other behaviors that make sense only in repeated games — such as the followers ’ paying the leader tribute — this paper considers a repeated-game version of Hermalin’s earlier model. Contact Information:

I develop a model of (individually rational) collective reality denial in groups, organizations and markets. Whether participants ’ tendencies toward wishful thinking reinforce or dampen each other is shown to hinge on a simple and novel mechanism. When an agent can expect to benefit from other’s delusions, this makes him more of a realist; when he is more likely to suffer losses from them this pushes him toward denial, which becomes contagious. This general “Mutually Assured Delusion ” principle can give rise to multiple social cognitions of reality, irrespective of any strategic payoff interactions or private signals. It also implies that in hierachical organizations realism or denial will trickle down, causing subordinates to take their mindsets and beliefs from the leaders. Contagious “exuberance ” can also seize asset markets, leading to evidence-resistant investment frenzies and subsequent deep crashes. In addition to collective illusions of control, the model accounts for the mirror case of fatalism and collective resignation. The welfare analysis differentiates valuable group morale from harmful groupthink and identifies a fundamental tension in organizations ’ attitudes toward free speech and dissent.

The assistance of the Harvard Business School’s California Research Center, and Chris Darwall in particular, was instrumental in the development of the case studies and is gratefully acknowledged. We also thank a number of practitioners—especially Eric Allman, Mike Balma, Brian Behlendorf, Keith Bostic, Tim O’Reilly, and Ben Passarelli—for their willingness to generously spend time discussing the open source movement. Jacques Crémer, Bernard Salanié, and Rob Merges provided helpful comments. Harvard

Why do some leaders succeed while others fail? This question is important, but its complexity makes it hard to study systematically. We draw on a setting where there are well-defined objectives, small teams of workers, and exact measures of leaders characteristics and organizational performance. We show that a strong predictor of a leader s success in year T is that person s own level of attainment, in the underlying activity, in approximately year T-20. Our data come from 15,000 professional basketball games and reveal that former star players make the best coaches. This expert knowledge effect is large.