Abstract

This paper studies the transaction cost economizing effects of
authoritarian management in organizations and systems subject to higher transaction
costs originating from various sources. We analyze the nature, mechanisms, and
transaction cost aspects of the authoritarian management style. We argue that the
higher the transaction costs of internal organization, the more autocratic the manager
is likely to be. We discuss the features of authoritarian managers, illustrating some of
our key hypotheses with the example of Henry Ford and his running of the Ford
Motor Company. In the context of non-market economies, we relate authoritarian
leadership to economic centralism in high transaction cost systems such as East
European societies with significant transactional or organizational opportunism, as
well as other sources of market failure.