DOES EMPOWERMENT LEAD TO HIGHER QUALITY AND PROFITABILITY

This paper examines the implications of alternative empowerment regime s on a firm's product quality and profitability when ownership and man agement of the, firm are separated and it faces environmental uncertai nties. The analyses of a three-stage game highlight the circumstances under which empowering a manager to make quality investment decisions results in higher profitability and/or product quality. When delegatio n reduces a manager's disutility, either monitored or complete empower ment arise as the preferred management system. If delegation increases the manager's disutility of effort, and uncertainties about consumers ' preferences are small, forcing may become the preferred management s ystem. (C) 1998 Elsevier Science B.V. All rights reserved.