Managerial Economics 2nd Edition by William Boyes

Exercise 21

It has been suggested that large, tall hierarchies will predominate in physical capital-intensive industries and that these will typically have seniority-based promotion policies. By contrast, flat hierarchies will be seen in human capital-intensive industries. These will have up-or-out promotion systems, where experienced managers either become owners or are fired. Can you provide a basis for or against the suggestion? Explain.