When is Human Capital a Valuable Resource? The Performance Effects of Ivy League Selection Among Celebrated CEOs
Strategic Management Journal, June 2015; Volume 36 Issue 6, Page 930-944
32 Pages Posted: 1 Apr 2014 Last revised: 8 Mar 2016
Date Written: February 6, 2014
This note investigates whether and when human capital selectively trained at the highest levels constitutes a resource that will sustain superior rents. Our study of a group of over 400 star CEOs who have been celebrated on the covers of major U.S. business magazines established that there is an advantage accruing to graduates of highly selective universities. CEOs from such schools were shown to have led firms with higher market valuations and also have a greater ability to sustain that valuation than other CEOs in the group. The advantage was strongest for undergraduate rather than graduate programs, the former being more apt to select and train for the kinds of subtle talent demanded of a CEO. The performance edge also was greatest in smaller firms where CEO discretion might be highest and for younger CEOs who benefit most from education and are less able to appropriate rents. Finally, the advantage accrued to graduates of more recent years, when selective schools had become less socially elitist and increasingly meritocratic, thus favouring the effects of human versus social capital.
Keywords: human capital, resource-based view, CEO demographics
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