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Leadership: A personnel economics approach

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  • Lazear, Edward P.
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    Abstract

    A theory of leadership is proposed and tested. Leaders perform many roles in a firm. They become leaders because they succeed at these tasks more than others and at least some of their successes are visible. The theory implies that leaders tend to be more able, place themselves in visible decision making situations more frequently and are generalists. Also, the most able leaders should be found in the highest variance industries, where decision making has the greatest payoff. The theory is tested using data on Stanford alumni and is confirmed. Leaders are generalists rather than specialists, both innately and in their pattern of skill acquisition.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0927537111000996
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    Bibliographic Info

    Article provided by Elsevier in its journal Labour Economics.

    Volume (Year): 19 (2012)
    Issue (Month): 1 ()
    Pages: 92-101

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    Handle: RePEc:eee:labeco:v:19:y:2012:i:1:p:92-101

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    Web page: http://www.elsevier.com/locate/labeco

    Related research

    Keywords: Personnel economics; Leadership; Generalist;

    References

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    1. Mana Komai & Mark Stegeman & Benjamin E. Hermalin, 2007. "Leadership and Information," American Economic Review, American Economic Association, vol. 97(3), pages 944-947, June.
    2. Joseph G. Altonji & Charles R. Pierret, 1997. "Employer learning and statistical discrimination," Working Paper Series, Macroeconomic Issues WP-97-11, Federal Reserve Bank of Chicago.
    3. Robert Gibbons & Michael Waldman, 1999. "A Theory Of Wage And Promotion Dynamics Inside Firms," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1321-1358, November.
    4. Bridgewater, Sue & Kahn, Lawrence M. & Goodall, Amanda H., 2011. "Substitution and complementarity between managers and subordinates: Evidence from British football," Labour Economics, Elsevier, vol. 18(3), pages 275-286, June.
    5. Michael Waldman, 1983. "Job Assignments, Signalling nad Efficiency," UCLA Economics Working Papers 286, UCLA Department of Economics.
    6. Julio J. Rotemberg & Garth Saloner, 1993. "Leadership Style and Incentives," Management Science, INFORMS, vol. 39(11), pages 1299-1318, November.
    7. Hajime Kobayashi & Hideo Suehiro, 2005. "Emergence Of Leadership In Teams," The Japanese Economic Review, Japanese Economic Association, vol. 56(3), pages 295-316.
    8. Atif Mian, 2008. "Incentives in Markets, Firms, and Governments," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(2), pages 273-306, October.
    9. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
    10. Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
    11. Dan Bernhardt & David Scoones, 1991. "Promotion: Turnover and Preemptive Wage Offers," Working Papers 817, Queen's University, Department of Economics.
    12. Pedro Rey Biel & Steffen Huck, 2005. "Endogenous Leadership in Teams," Microeconomics 0506004, EconWPA.
    13. Fredrik Andersson & Matthew Freedman & John Haltiwanger & Julia Lane & Kathryn Shaw, 2009. "Reaching for the Stars: Who Pays for Talent in Innovative Industries?," Economic Journal, Royal Economic Society, vol. 119(538), pages F308-F332, 06.
    14. Benjamin E. Hermalin, 1997. "Toward an Economic Theory of Leadership: Leading by Example," Microeconomics 9612002, EconWPA.
    15. Hermalin, Benjamin E., 2007. "Leading for the long term," Journal of Economic Behavior & Organization, Elsevier, vol. 62(1), pages 1-19, January.
    16. Mana Komai & Mark Stegeman, 2010. "Leadership based on asymmetric information," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 35-63.
    17. Baumol, William J, 1990. "Entrepreneurship: Productive, Unproductive, and Destructive," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 893-921, October.
    18. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    19. Edward P. Lazear, 2004. "The Peter Principle: A Theory of Decline," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S141-S163, February.
    20. Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 169-82, January.
    21. Calvo, Guillermo A & Wellisz, Stanislaw, 1978. "Supervision, Loss of Control, and the Optimum Size of the Firm," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 943-52, October.
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    Citations

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    Cited by:
    1. Goodall, Amanda H., 2012. "A Theory of Expert Leadership," IZA Discussion Papers 6566, Institute for the Study of Labor (IZA).
    2. Kvaløy, Ola & Schöttner, Anja, 2012. "Incentives to Motivate," UiS Working Papers in Economics and Finance 2012/15, University of Stavanger.
    3. Elisabeth Bublitz & Florian Noseleit, 2014. "The skill balancing act: when does broad expertise pay off?," Small Business Economics, Springer, vol. 42(1), pages 17-32, January.
    4. Mirella Damiani & Andrea Ricci, 2012. "The role of education of entrepreneurs on adoption of different contingent pay schemes: evidence from Italian firms," Quaderni del Dipartimento di Economia, Finanza e Statistica 116/2013, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
    5. Eisenkopf, Gerald, 2014. "The impact of management incentives in intergroup contests," European Economic Review, Elsevier, vol. 67(C), pages 42-61.
    6. Gerald Eisenkopf, 2013. "The Impact of Management Incentives in Intergroup Contests," TWI Research Paper Series 87, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    7. Damiani, Mirella & Ricci, Andrea, 2013. "Entrepreneurs’ education and different variable pay schemes in Italian firms," MPRA Paper 46163, University Library of Munich, Germany.
    8. Gerald Eisenkopf, 2013. "The Impact of Management Incentives in Intergroup Contests," Working Paper Series of the Department of Economics, University of Konstanz 2013-26, Department of Economics, University of Konstanz.

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