NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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The Impacts of Managerial Autonomy on Firm Outcomes

Namrata Kala

NBER Working Paper No. 26304
Issued in September 2019
NBER Program(s):Development Economics, Productivity, Innovation, and Entrepreneurship

The allocation of decision rights within organizations influences resource allocation, expansion decisions, and ultimately outcomes. Using a newly constructed dataset, I estimate the effects of an earned autonomy program for State Owned Enterprises (SOEs) in India. The program gave managers (the board of directors) of profitable SOEs more autonomy over strategic decisions such as capital expansion and the formation of joint ventures. I find that autonomy allows SOEs to increase their capital stock and form more strategic partnerships which leads to greater sales and profits. I also find that the likelihood that a manager subsequently joins a board of a private firm is greater for managers of those SOEs which were granted autonomy, indicating that career concerns is a consistent explanation for these managerial decisions. Taken together, these results indicate that large gains in SOE performance are possible without privatization (by policies like earned autonomy) and may occur partly through managers' career concerns.

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Document Object Identifier (DOI): 10.3386/w26304

 
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