Elena Kulchina will be joining us from Duke this Wednesday, presenting, “Is It Worth Trusting Your Manager?” It will be in Cheit 330 at 12:10pm at the Haas Business School. There is no paper, but here is the abstract:
Researchers have long been interested in the role of top managers in organizations. The existing research, however, has largely focused on the individual characteristics of managers and paid less attention to the social aspects of the relationships between managers and owners. In this paper, we focus one such social aspect—the asymmetry of trust between an owner and a manager. We use a setting of entrepreneurial firms and examine how the trust-asymmetry between an entrepreneur and an outside manager affects firm performance. We argue that managers who are under-trusted relative to their own levels of trust will feel frustrated and disappointed, leading to low performance of their firms, whereas over-trust would not necessarily have a negative impact on performance. We demonstrate that under-trusted managers are indeed associated with lower firm performance. The negative relationship is particularly strong when communication between an owner and a manager is expected to be more difficult and when under-trust is less evident. Conversely, equal trust and over-trust have no significant negative association with the performance of firms with hired managers.
Last week we heard from Ross Levine and saw his evidence that the implementation of insider trading laws increased patenting and citations. It’s a hopeful result though I would be eager to see if the increased patenting also included explorative search and not just better governance and exploitation.
In the doctoral reading class this week, we’ll be reading Pierre Azoulay’s superstar extinction and retractions paper. He’ll be skyping in to join us at 2:30pm in Cheit 132.