Organizational Capital, Corporate Leadership, and Firm Dynamics

63 Pages Posted: 11 Feb 2019 Last revised: 18 Feb 2019

See all articles by Wouter Dessein

Wouter Dessein

Columbia Business School - Finance and Economics

Andrea Prat

Columbia Business School - Finance and Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: February 2019

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

JEL Classification: L22

Suggested Citation

Dessein, Wouter and Prat, Andrea, Organizational Capital, Corporate Leadership, and Firm Dynamics (February 2019). CEPR Discussion Paper No. DP13513, Available at SSRN: https://ssrn.com/abstract=3332316

Wouter Dessein (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Andrea Prat

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
180
PlumX Metrics