Organizational Capital, Corporate Leadership, and Firm Dynamics

Andrea Prat and Wouter Dessein

No 13513, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We argue that economists have studied the role of management from three perspectives: contingency theory (CT), an organization-centric empirical approach (OC), and a leader-centric empirical approach (LC). To reconcile these three perspectives, we augment a standard dynamic firm model with organizational capital, an intangible, slow-moving, productive asset that can only be produced with the direct input of the firm's leadership and that is subject to an agency problem. We characterize the steady state of an economy with imperfect governance, and show that it rationalizes key findings of CT, OC, and LC, as well as generating a number of new predictions on performance, management practices, CEO behavior, CEO compensation, and governance.

Keywords: Ceo; Management; Organizational capital (search for similar items in EconPapers)
JEL-codes: L22 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-hrm and nep-mic
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Citations: View citations in EconPapers (16)

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