Managerial knowledge and technology choice: evidence from U.S. mining schools

How do managers affect firm performance? A key difference between managers and other production inputs is that they choose the production function. I empirically distinguish between the direct effects of managers as inputs in the production process, which is the standard way to think about management, and their indirect effects as decision-makers of the production technology. I use this model to understand how the introduction of mining engineering degrees in the U.S.A. changed coal mining productivity. I find that conditional on all inputs and technology choices, mines managed by managers with mining degrees were not more productive than other mines. Mining college graduates did, however, tend to select better technologies, which in turn increased productivity by 29% on average. The main mechanism behind these better choices was that mining college graduates had superior ex-ante knowledge about the returns to various new technologies, while other managers had to acquire this information through trial-and-error.