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Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management

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  • Guadalupe, Maria

    ()
    (INSEAD)

  • Li, Hongyi

    ()
    (Massachusetts Institute of Technology)

  • Wulf, Julie M.

    ()
    (Harvard Business School)

Abstract

This paper shows that top management structures in large US firms radically changed since the mid-1980s. While the number of managers reporting directly to the CEO doubled, the growth was driven primarily by functional managers rather than general managers. Using panel data on senior management positions, we explore the relationship between changes in executive team composition, firm diversification, and IT investments – which arguably alter returns to exploiting synergies through corporate-wide coordination by functional managers in headquarters. We find that the number of functional managers closer to the product ("product" functions i.e., marketing, R&D) increase as firms focus their businesses, while the number of functional managers farther from the product ("administrative" functions i.e., finance, law, HR) increase with IT investments. Finally, we show that general manager pay decreases as functional managers join the executive team suggesting a shift in activities from general to functional managers – a phenomenon we term "functional centralization."

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6635.

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Length: 35 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6635

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Related research

Keywords: communication; organizational design; functions; centralization; M-form; hierarchy; top management team; information technology; activities; diversification;

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  1. Jacques Crémer & Luis Garicano & Andrea Prat, 2007. "Language and the Theory of the Firm," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 373-407, 02.
  2. Nick Bloom & Luis Garicano & Raffaella Sadun & John Van Reenen, 2009. "The Distinct Effects of Information Technology and Communication Technology on Firm Organization," CEP Discussion Papers dp0927, Centre for Economic Performance, LSE.
  3. Alfred D. Chandler, 1969. "Strategy and Structure: Chapters in the History of the American Industrial Enterprise," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530090, January.
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