Technological Fit and the Market for Managerial Talent
75 Pages Posted: 24 Jan 2020 Last revised: 1 Mar 2021
Date Written: March 1, 2021
We show that the similarity of a firm’s technological expertise with that of other firms affects managerial labor market outcomes. Using each firm’s patent portfolio to estimate its technological expertise, we find that its similarity in technological expertise with other firms is strongly related to the benchmark group used for CEO compensation and to job transitions. Furthermore, we show that CEO compensation increases with the level of a firm’s overall technological similarity with other firms. Our results thus demonstrate the crucial role of technological similarity in determining the value of outside options and the boundaries of the managerial labor market.
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