Industry Co-agglomeration, Executive Mobility and Compensation

Abstract

We find evidence of geographic segmentation in the market for top executives and identify industry co-agglomeration as the primary driver. When top executives move from one firm to another, nearly 40% of the moves are between local firms, which is more than five times greater than predicted by available employment opportunities. Furthermore, these local moves are dominated by moves among firms in co-agglomerated industries. While the strong local move bias is also accompanied by local co-movement in the compensation of top executives, the co-movement is driven by local peers in co-agglomerated industries only but not by other local peers.

Keywords: Industry co-agglomeration; Executive mobility; Geographic segmentation; Executive compensation; Local peers; Management style

JEL Classification: G34, M52