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  3. American Economic Journal: Microeconomics
  4. August 2021
  5. Managerial Style and Attention

Managerial Style and Attention

  • Wouter Dessein
  • Tano Santos
American Economic Journal: Microeconomics
vol. 13, no. 3, August 2021
(pp. 372-403)
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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.

Citation

Dessein, Wouter, and Tano Santos. 2021. "Managerial Style and Attention." American Economic Journal: Microeconomics, 13 (3): 372-403. DOI: 10.1257/mic.20190025

Additional Materials

JEL Classification

  • D21 Firm Behavior: Theory
  • D23 Organizational Behavior; Transaction Costs; Property Rights
  • G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
  • M10 Business Administration: General
  • M31 Marketing
  • M54 Personnel Economics: Labor Management
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