Research

Leaders matter. Leaders have strategic, operational, and tactical influence. I seek to analyze leadership and influence across these three spectra using economic and social network modeling, experimental research, and applied empirical techniques.

Emphasizing Leadership as Economics

My overarching research goal is to explore the economics of leadership and influence. Strategically, leaders allocate resources within organizations and design systems that determine incentives, influence culture, and create institutions. Good leaders inspire action and motivate progress. Operationally, leaders can rectify conditions that lead to traditional market failures associated with externalities, information asymmetry, and perverse incentives (Alchian and Demsetz, 1972), and they improve efficiency of markets by reducing search, negotiation, coordination, and enforcement costs (Coase, 1937). Leaders can provide vision, build unity, and enhance a sense of belonging to maximize the return on relationship capital within and between organizations. Tactically, leaders add value to an organization by understanding the formal and informal constraints affecting a situation and adjusting conditions to motivate improved decision making (North et al., 1990). Leaders improve efficiency when the benefits of involvement exceed the costs of interference (ibid.). Efficient leaders must know and recognize how and when to contribute to their team’s output and recognize when their involvement will decrease efficiency.

If leaders affect the productivity of their organizations, then their contribution must be a function of the intellectual capital portfolio they provide, i.e., structural, human, and relationship capital. This capital comes in the forms of knowledge and experience, existing relationship networks, leadership and business philosophy, and risk or policy preferences which impact costs and productivity through implementation of management practices. Principle-agent theory suggests that alignment of incentives throughout an organization reduces monitoring, control and transactions costs. However, Collins (2001) finds that implementation of better management practices is not sufficient to produce the type of changes which encourage significant corporate growth. If it were easy to reproduce, competitors would be able to do it easily. Rather, Collins finds that getting the “right” people in place first is more important than their initial managerial practices. Thus, the first step in the acquisition of intellectual capital in an organization is not the structural element, but instead the human element. Similarly, Brynjolffson, Hitt, and Yang (2002) find that investment in technology is not enough to improve performance, but technology purchases only significantly increase productivity when combined with leadership practices associated with healthy relationships within the firm. Thus, the first step in the development of organizational capital is not the technology element, either, but again, the personal element.

Relationships as Capital

My research includes a study of the development, measurement, and utilization of relationship capital as a productive economic asset. If leaders create change by influencing others, relationship capital should be a key element in that production function. By definition, capital includes the set of resources we invest in that decreases future operating costs. I see the exploration of strategic, operational, and tactical decisions regarding relationship capital investment and consumption decisions to be fertile ground for a vast array of research questions and analytical techniques. For example, the market volatility paper described above yields information about which leaders are important, but that also signals with relationships are important for firms to invest in mand maintain. Compared with more traditional forms of capital, relationship capital has unique characteristics, such as exponential growth, indefinite depreciation rates, and significant positive and negative externalities in its creation and consumption. These principles align well with social network modeling developed by Matthew Jackson (2009).

Social capital pioneers such as Coleman (1988) and Putnam (1993) added revolutionary elements to consideration of intangible capital in economic research. The identification of the role of social capital in building trust, enhancing cooperative outcomes, and motivating economic growth has influenced tens of thousands of research projects. Unfortunately, I agree with Robison, Schmid, and Siles (2002) tongue-in-cheek statement that “[t]he term social capital has taken on so many meanings and enlisted to fight to many battles that it is at risk of becoming the ether that fills the universe,” and I believe that their proposed definition of social capital is perhaps more aptly labeled relationship capital. Individuals and organizations decide who they want to associate with, how they will relate to one another, and invest strategically in relationships to enhance future productivity. The continuing relevance of exploring intangible capital as a productive asset is emphasized by the fact that the first three articles of the most recent issue of The Journal of Economic Perspectives (Iommi, 2022; Nicolas Crouzert, 2022; Bart J. Bronnenberg, 2022) address the economics of intangible capital. Relationship capital is an influential element of intangible capital about which I plan to expand the frontier of knowledge.