Do Managers Make Use of Increased Autonomy? Evidence from Large Scale Organizational Reform

Abstract

The question of what is the right amount of managerial autonomy has been widely debated. The new public management movement argues that increased autonomy will be used by managers to improve organizational performance. Skeptics argue that managers in the public sector are likely to shy away from using increased autonomy. To bring the literature forward we theorize the link between reforms awarding managers increased autonomy and subsequent organizational performance outcomes. We identify four steps in this causal chain, which are easily conflated. We demonstrate empirically the potential of focusing on the intermediary mechanisms of increasing managerial autonomy. A large-scale municipal amalgamation reform in Denmark provides a unique opportunity to study the immediate impacts of changes in managerial autonomy in public schools. The results indicate that granting public managers more freedom has intermediary effects on factors such as hiring patterns and organizational demographics.