Managerial Style and Attention

Wouter Dessein and Tano Santos

American Economic Journal: Microeconomics, 2021, vol. 13, issue 3, 372-403

Abstract: Is firm behavior mainly driven by its environment or rather by the characteristics of its managers? We develop a cognitive theory of manager fixed effects, where the allocation of managerial attention determines firm behavior. We show that in complex environments, the endogenous allocation of attention exacerbates manager fixed effects. Small differences in managerial expertise then may result in dramatically different firm behavior, as managers devote scarce attention in a way that amplifies initial differences. In contrast, in less complex environments, the endogenous allocation of attention mitigates manager fixed effects. Firm owners prefer "managers with style" only in complex environments.

JEL-codes: D21 D23 G34 M10 M31 M54 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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DOI: 10.1257/mic.20190025

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