Leadership, coordination, and corporate culture

Patrick Bolton, Markus K. Brunnermeier, Laura Veldkamp

Research output: Contribution to journalArticle

48 Scopus citations

Abstract

What is the role of leaders in large organizations? We propose a model in which a leader helps to overcome a misalignment of followers' incentives that inhibits coordination, while adapting the organization to a changing environment. Good leadership requires vision and special personality traits such as conviction or resoluteness to enhance the credibility of mission statements and to effectively rally agents around them. Resoluteness allows leaders to overcome a time-consistency problem that arises from the fact that leaders learn about the best course of action for the organization over time. However, resoluteness also inhibits bottom-up information flow from followers. The optimal level of resolutenessdepends on followers' signal quality and the corporate culture of the organization.

Original languageEnglish (US)
Pages (from-to)512-537
Number of pages26
JournalReview of Economic Studies
Volume80
Issue number2
DOIs
StatePublished - Apr 1 2013

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • Coordination
  • Corporate Culture
  • Leadership
  • Overconfidence

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