Managerial Style and Attention

67 Pages Posted: 24 Aug 2017 Last revised: 3 Feb 2019

See all articles by Wouter Dessein

Wouter Dessein

Columbia Business School - Finance and Economics

Tano Santos

Columbia Business School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2016

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 which amplifies initial differences. In contrast, in less complex environments, the endogenous allocation of attention mitigates manager fixed effects. Firm owners prefer managers with task-specific expertise only in complex environments.

Keywords: Managerial Style, Attention, Managerial Fixed Effects, Firm Behavior

Suggested Citation

Dessein, Wouter and Santos, Tano, Managerial Style and Attention (September 1, 2016). Columbia Business School Research Paper No. 17-91, Available at SSRN: https://ssrn.com/abstract=3024930 or http://dx.doi.org/10.2139/ssrn.3024930

Wouter Dessein (Contact Author)

Columbia Business School - Finance and Economics ( email )

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Tano Santos

Columbia Business School ( email )

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National Bureau of Economic Research (NBER)

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