Employees and Entrepreneurship
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Employees and Entrepreneurship

Co-ordination and Spontaneity in Non-Hierarchical Business Organizations

  • New Thinking in Political Economy series

Ivan Pongracic Jr.

Over the last few decades, there has been a great deal of management literature recommending the removal of firms’ hierarchies and the empowerment of employees. Ivan Pongracic, Jr. examines these themes through the lense of the economic theory of the firm. Balancing the tendency for management literature to overlook basic costs and trade-offs of decentralization, and the rigidity of economics that hinders an appreciation for the real world phenomenon of decentralization, this book arrives at a realistic middle ground between the two extremes. The dance between hierarchy and employee empowerment exists in even the most hierarchical firms, and this book explores this often overlooked dynamic.
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Chapter 5: Employees as Creative Agents

Ivan Pongracic Jr.

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5. Employees as creative agents When people make their own decisions about how to do their work and allocate their time, they often put more energy, effort, and creativity into their jobs. Studies of R&D projects, for instance, have found that when the members of project teams feel more freedom and control over their work they become more innovative. That sense of autonomy is probably part of entrepreneurial motivation, too: Not only do you keep the economic rewards of your own work, but you also can make your own decisions and feel like an owner. When people feel tightly controlled, by contrast, they are often less motivated and less creative. Albert Einstein put it well when he remembered the militaristic school he attended as a child: ‘This coercion had such a deterring effect upon me that, after I had passed the final examination, I found the consideration of any scientific problems distasteful for an entire year.’ (Malone 2004, pp. 34–5) ENTREPRENEURSHIP AND CREATIVITY We have a much better understanding today of the benefits and costs of delegation and decentralization, and the relevant tradeoffs between the two. But there is one benefit of decentralization that has not been discussed in great detail so far: the creative response within firms. Discussion of elements of creativity within firms remains mostly neglected, even by Austrian economists.1 Creativity in action is best understood as innovative behavior that results in the introduction of new knowledge. That new knowledge...

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