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

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  • Maria Guadalupe
  • Hongyi Li
  • Julie Wulf

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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17846.

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Date of creation: Feb 2012
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Publication status: published as Prev Volume 60 Issue 4, April 2014, pp. 824-844 Next Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management Maria Guadalupe INSEAD, 77300 Fontainebleau, France; and Centre for Economic Policy Research, London EC1V 3PZ, United Kingdom maria.guadalupe@insead.edu, Hongyi Li Australian School of Business, University of New South Wales, Sydney NSW 2052, Australia hongyi@unsw.edu.au, Julie Wulf Harvard Business School, Harvard University, Boston, Massachusetts 02163; and National Bureau of Economic Research, Cambridge, Massachusetts 02138 jwulf@hbs.edu
Handle: RePEc:nbr:nberwo:17846

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  1. Jacques Cremer & Luis Garicano & Andrea Prat, 2006. "Language and the Theory of the Firm," Levine's Bibliography 784828000000000373, UCLA Department of Economics.
  2. Wouter Dessein & Luis Garicano & Robert Gertner, 2010. "Organizing for Synergies," American Economic Journal: Microeconomics, American Economic Association, American Economic Association, vol. 2(4), pages 77-114, November.
  3. Nick Bloom & Luis Garicano & Raffaella Sadun & John Van Reenen, 2009. "The distinct effects of information technology and communication technology on firm organization," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 25477, London School of Economics and Political Science, LSE Library.
  4. Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(5), pages 874-904, October.
  5. 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, December.
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