Are employment and managerial control equivalent? Evidence from an electronics producer

Abstract

Transaction cost economics recognizes two alternative forms of governing production and exchange – market coordination and managerial control. When examining the contractual relationship between firms and workers, researchers generally consider employment to represent managerial control. This paper tests the assumption that employment is characterized by managerial control. Using evidence from an electronics producer, this paper tests whether factors affecting the employment status of workers, such as asset specificity, task interdependence, and high knowledge requirements, also affect the degree to which workers are managerially controlled. This research helps explain a number of market, organizational, and managerial innovations, such as employee self-management and the use of temporary workers.