The Importance of Legitimacy
Within organizations, there are typically limits to leaders’ legitimacy. This article explores how organizations are structured in the face of such constraints. The concept of legitimacy is formalized in the context of a single-agent moral hazard m...
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| Format: | Journal Article |
| Language: | English |
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Published by Oxford University Press on behalf of the World Bank
2019
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| Online Access: | http://documents.worldbank.org/curated/en/704991565614319221/The-Importance-of-Legitimacy http://hdl.handle.net/10986/32241 |
| Summary: | Within organizations, there are
typically limits to leaders’ legitimacy. This article
explores how organizations are structured in the face of
such constraints. The concept of legitimacy is formalized in
the context of a single-agent moral hazard model. The
principal can give the agent monetary incentives; in
addition, he can give the agent an order. The agent finds it
costly to disobey orders provided they are legitimate. The
authors find that it may be optimal for the principal to
take costly actions to bolster legitimacy. The authors argue
that many organizational phenomena can be understood as
attempts to bolster legitimacy. Examples include: rejection
of overqualified workers, bureaucracy, merger decisions, and
above-market-clearing wages. |
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