Managerial Talent and Managerial Practices: Are They Complements?

57 Pages Posted: 25 May 2021

Multiple version iconThere are 2 versions of this paper

Date Written: April 22, 2021

Abstract

We examine the role of managerial talent and its interaction with managerial practices in determining firm performance. We build a matched firm-director panel dataset for the universe of limited liability companies in Italy, tracking individuals across different firms over time. We define managerial talent as management's capacity to boost firms' total factor productivity, estimated using a two-way fixed effects model. Combining the data with survey information on a representative sample of firms, we then document that our measure of talent correlates with ex-ante and ex-post indicators of ability, i.e. managers' educational attainment and their forecast precision with respect to the firm's future performance. Most important, we leverage information on the adoption of managerial practices within the firm to examine potential synergies between managerial talent and structured managerial practices, thus bridging two separate strands of the literature. While talent and structured practices do boost firm productivity on their own, there is evidence of complementarities between the two. These findings hold both in a cross-sectional setting and in a panel analysis that accounts for time-invariant firm heterogeneity. Overall, our results indicate that the effectiveness of managerial practices depends on managers' ability to implement them.

Keywords: board of directors, managers, corporate governance, productivity, managerial practices

JEL Classification: G34, M10, D24

Suggested Citation

Baltrunaite, Audinga and Bovini, Giulia and Mocetti, Sauro, Managerial Talent and Managerial Practices: Are They Complements? (April 22, 2021). Bank of Italy Temi di Discussione (Working Paper) No. 1335, Available at SSRN: https://ssrn.com/abstract=3852829 or http://dx.doi.org/10.2139/ssrn.3852829

Audinga Baltrunaite

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Giulia Bovini (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Sauro Mocetti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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