Reporter: Dr. Jiang Shicheng, Associate Professor of the School of Business, ECUST, and Researcher of Oliver Hart Research Center of Contracts and the Governance. Research fields mainly include contract theory and organizational economics.

The Abstract of the Report:

We consider rules as reference points of agents in organizations. Rules in organizations may be rigid or flexible. Flexible rules allowing more discretion for agents may bring about more benefits ex post or more investment ex ant. Rigid rules could improve ex-post efficiencies by reducing shading cost. In organizations, the more heterogeneous the agents in an organization, the more rigid the rules of the organization, and the higher the proportion of agents with higher output, the more flexible the rules are. This result could explain why large firms or organizations tend to formulate more rigid rules, and small businesses tend to develop flexible rules, and why small businesses usually provide agents with more motivations for innovations relying talents which requires more discretion than just monetary incentives.