Enterprise transformation as coordination game: The leadership challenge

Abstract

Empirical evidence, especially in case studies, shows that individual leaders often have a crucial role in successful enterprise transformation in transition economies. Conventional economic analysis of corporate governance alone cannot explain this role of leadership. In this theoretical paper I use coordination games to analyse transitions from one equilibrium to another. I argue that the creation of common knowledge among stakeholders by a leader allows firms to overcome coordination failures. This is crucial for enterprise transformation because of the multiplicity of stakeholders who need to coordinate their action to implement radical organizational change.