Consequences of Executive Focus on Support Activities: Evidence from Executive Influence on Firm Tax Strategy

Abstract

Should executives solely focus on core activities of the firm? Or is it beneficial to focus on both core and support activities? It could be the case that executives focused on support activities are attempting to multitask which will limit their accuracy and productivity. Alternatively, these executives focused on support activities could be obtaining synergies and knowledge spillover. Or it could be the case that multitasking limits and synergies both occur and vary according to situation or executive. Using executive influence on firm tax strategy as a proxy for executive focus on support activities, I find that executive focus on support activities is associated with poorer firm performance and negative executive labor market consequences. These results are partially moderated by executive ability, background, position, and year. Overall the results suggest that top executives perform best when focused solely on core activities. The results also suggest that executives should hire or contract competent individuals to focus on support activities.

Keywords: Support Activities, Executives, Tax Strategy