Cover: Inside the Firm: The Inefficiencies of Hierarchy, from Harvard University PressCover: Inside the Firm in E-DITION

Inside the Firm

The Inefficiencies of Hierarchy

Product Details


$65.00 • £54.95 • €60.00

ISBN 9780674420809

Publication Date: 11/30/1987

276 pages



Available from De Gruyter »

Media Requests:

Related Subjects

Harvard University Press has partnered with De Gruyter to make available for sale worldwide virtually all in-copyright HUP books that had become unavailable since their original publication. The 2,800 titles in the “e-ditions” program can be purchased individually as PDF eBooks or as hardcover reprint (“print-on-demand”) editions via the “Available from De Gruyter” link above. They are also available to institutions in ten separate subject-area packages that reflect the entire spectrum of the Press’s catalog. More about the E-ditions Program »

Why are most businesses less efficient than they could be? Why do two identical Ford plants in England and Germany, manufacturing identical cars, have vastly different rates of production? If the Japanese learned quality control from the Americans, why can’t American firms adopt the same techniques and perform as well?

Until now, such important questions have hardly been addressed, let alone answered. Harvey Leibenstein explores them in depth, using ideas and evidence from economics, game theory, psychology, and other disciplines. He observes that employees usually perform best when they work under a moderate amount of pressure—not too little and not too much. But this sort of balanced situation is rare, so most workers in low-pressure situations may shirk their tasks, while those in a stressful atmosphere may cave in. Although such low-pressure shirking behavior may be rational for the individual, it would be disastrous if adopted by everyone.

To avoid this state of affairs, Leibenstein argues, workers tacitly adopt conventions about proper degrees of effort. These standards, which frequently defy rational considerations, are largely governed by the history of the firm, the degree of hierarchy, and the nature of the competitive relationships within the firm. For example, in Japanese firms, where cooperation is highly valued, the implicitly agreed upon standards of work effort are higher than in Western firms, where competition between individuals and adversarial relations between hierarchical layers are frequently the norm. The Japanese worker is loyal to the company; jobs are normally rotated, and the employee can therefore assume a more flexible attitude knowing that if his current job is abolished, his position as a valued firm member does not change. In the United States, where skill is stressed and job boundaries are guarded, workers worry about job security and therefore agree to change only when catastrophe looms.

Leibenstein analyzes the structure and functioning of companies with multiple levels of hierarchy, pinpointing sources of inefficiency. He also examines the question of entrepreneurship. His new book will attract economists, organizational psychologists, and executives—all who are concerned with the competitiveness of the American economy.

Recent News

Black lives matter. Black voices matter. A statement from HUP »

From Our Blog

Jacket: Iron and Blood: A Military History of the German-Speaking Peoples since 1500, by Peter Wilson, from Harvard University Press

A Lesson in German Military History with Peter Wilson

In his landmark book Iron and Blood: A Military History of the German-Speaking Peoples since 1500, acclaimed historian Peter H. Wilson offers a masterful reappraisal of German militarism and warfighting over the last five centuries, leading to the rise of Prussia and the world wars. Below, Wilson answers our questions about this complex history,