Monitoring technical managers: Theory, evidence, and prescriptions

In the modern economy, a division of labor is a division of knowledge. The challenge of limited information and goal conflict within organizations takes on special salience in the presence of technology. In order to manage technical managers, general managers and executives must judge proposals beyond their direct knowledge. Technical managers may, through opportunism or overconfidence, suggest overinvestment in technology. Analyzing a dataset of information technology hardware and staff spending by large multidivisional firms during a growth phase of US IT spending, results suggest that technical managers significantly overspent on hardware, with negative consequences for performance. Chief executive experience significantly altered the effects of overspending. Solutions to the problem of monitoring technical managers are suggested, including socialization, auditing, and incentives.