Prof Yona Rubinstein MAR 6.26

This course is compulsory on the MSc in Management and Strategy. This course is available on the CEMS Exchange, Global MSc in Management, Global MSc in Management (CEMS MIM), Global MSc in Management (MBA Exchange), MBA Exchange and MSc in Management (1 Year Programme). This course is available with permission as an outside option to students on other programmes where regulations permit.

In this course we investigate aspects of management and the internal organisation of the firm from birth to end.

What makes a successful entrepreneur? Are managers subject to human biases in decision making?

Our starting point is that entrepreneurs and managers are human. We neglect neither general heuristics nor biases exhibited by individuals and groups and their impact on firms’ performance.

We further recognise that they make decisions in situations in which information is not perfect and not symmetrically shared, neither internally with their employees nor externally. We also consider the capabilities of organisations to design management strategies to cope with that.

How can firms attract and select the ‘right’ employees? Can pay and promotions be structured to screen the best workers and extract their efforts? Should firms develop employees’ talent and if so, how? Why do firms form teams and how are these used most effectively? Do experts follow the crowd? Why do they turn to be “yes-men”? Can pay incentives be structured to motivate experts to share their private knowledge?

Design and Management of Organisations introduces students to a set of conceptual tools to cope with these key managerial challenges and critically evaluate contemporary management approaches.

The organising principle of much of the content of the course has its conceptual origins in economic strategy and behavioral economics applied to issues that are relevant to management. Additionally we draw upon findings form psychology and sociology.

The course complements MG4A3 (Incentives and Governance in Organisations) but can be taken as a stand-alone course.

33 hours of combined lecture/seminars in the WT and 2 hours of combined/lecture seminars in the ST.

Students on this course will have a reading week in Week 6, in line with Departmental policy.

Students will be expected to produce 1 problem sets in the WT.

Multiple exercises will be provided throughout the term and will be discussed during lectures and review sessions. In addition a major problem set will be circulated at the end of the week 5. This problem set will be discussed in class for feedback purposes only.

The first set of slides will be provided during lecture 1 and subsequent sets will be posted online. These slides constitute the backbone of the course. You are expected to flesh out the slides using models, graphs, and examples discussed during the lectures.

Additional readings:

Kenneth J. Arrow. 1973. The Theory of Discrimination, in O. Ashenfelter and A. Rees (eds.), Discrimination in Labor Markets, Princeton, NJ: Princeton University Press.

Abhijit V. Banerjee. 1992. A Simple Model of Herd Behavior. The Quarterly Journal of Economics 107(3): 797-817.

Nicholas Bloom and John Van Reenen. 2007. Measuring and Explaining Management Practices Across Firms and Countries. The Quarterly Journal of Economics 122(4): 1351-1408.

David De Meza and Clive Southey. 1996. The borrower’s curse: Optimism, finance, and entrepreneurship. Economic Journal 106: 375-386.

James J. Heckman and Yona Rubinstein. 2001. The importance of noncognitive skills: Lessons from the GED testing program. American Economic Review 91(May): 145-149.

Erik Hurst and Benjamin W. Pugsley. 2011. What do small businesses do? Brookings Papers on Economic Activity (Fall): 73-118.

Daniel Kahneman and Amos Tversky. 1979. Prospect Theory: An Analysis of Decision under Risk. Econometrica 47(2): 263-292.

Edward P. Lazear. 2005. Entrepreneurship. Journal of Labor Economics 23(4): 649-680.

Ross Levine and Yona Rubinstein. 2015. Smart and Illicit: Who Becomes an Entrepreneur and Do They Earn More? NBER Working Paper No. 19276.

Canice Prendergast. 1993. A Theory of 'Yes Men'. American Economic Review 83(4): 757-770.

Exam (100%, duration: 2 hours) in the spring exam period.