Opportunism and Organization Under the Black Flag

The prospect of opportunism poses a constant threat to firms. Firms that can’t overcome this threat have no chance of succeeding in their market. To conquer the competition, firms must first conquer the specter of self-dealing that plagues their internal operations. The terms “opportunism” and “self-dealing” are used broadly to connote any behaviors by firm members that provide them private benefits at other firm members’ expense. Opportunism within the firm has two sources: that which originates at the point of firm management and that which originates at the point of their employees. For example, managers at Enron, WorldCom, Madoff Securities, and Tyco, among others, behaved opportunistically by diverting firm resources to themselves or abusing their authority over employees. Employees may behave opportunistically by shirking or engaging in activities that make work easier for them, but make it harder for their colleagues to do their jobs. Whatever its source, self-dealing undermines intra-firm harmony, cooperation, and firm productivity.

Read the article at ScienceDirect.