Firm location quality, founding family firms, and management team expertise

Tsung-Kang Chen, Yijie Tseng and Yu-Ting Hsieh

The Quarterly Review of Economics and Finance, 2023, vol. 88, issue C, 177-189

Abstract: We investigate whether firm location quality affects the management team expertise by employing 15,433 Taiwanese companies from 2006 to 2018. We find that the remoteness of a firm’s location positively relates to management team expertise, suggesting that the effect of managerial entrenchment (observable or hidden compensation) dominates that of the small human pool in rural firms, which thereby attract managers with greater expertise to join rural firms. In addition, the effect of firm location quality on management team expertise becomes weaker when the firm is controlled by the founding family (i.e. the firm’s CEO is the founder or the founder’s descendant), implying that non-family managers may view family firms as an unattractive option because of the limited potential to progress in the company. Finally, our results hold with the consideration of endogeneity issues.

Keywords: Firm location quality; Founding family firms; Management team expertise; Geography characteristics; Managerial entrenchment (search for similar items in EconPapers)
JEL-codes: M10 M12 R10 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:88:y:2023:i:c:p:177-189

DOI: 10.1016/j.qref.2023.01.004

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