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Why do leaders matter? A study of expert knowledge in a superstar setting

  • Goodall, Amanda H.
  • Kahn, Lawrence M.
  • Oswald, Andrew J.

This paper provides evidence of the importance of what might be termed 'expert leaders'. Although it is widely assumed that leaders affect the performance of their organizations, the complexity of this social-science research area has meant that comparatively little empirical progress has been made. We deliberately choose a narrow focus. We examine a high-skill setting in which there are accurate data on performance. We argue that an influential role is played by a leader's expert knowledge. A strong predictor of a leader's success in year T is that person's level of technical attainment, in the underlying activity, in approximately year T-20. Our data are on US professional basketball. The paper documents a correlation between brilliance as a player and the (much later) winning percentage and playoff success of that person as a team coach. The results suggest that leaders' effects on performance are substantial and are visible in the data within the first 12 months of a coach being hired.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 77 (2011)
Issue (Month): 3 (March)
Pages: 265-284

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Handle: RePEc:eee:jeborg:v:77:y:2011:i:3:p:265-284
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  1. Peter Dawson & Stephen Dobson, 2002. "Managerial efficiency and human capital: an application to English association football," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(8), pages 471-486.
  2. Borghans Lex & Lee Duckworth Angela & Heckman James J. & Weel Bas ter, 2008. "The Economics and Psychology of Personality Traits," ROA Research Memorandum 001, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  3. Arbak, Emrah & Villeval, Marie Claire, 2007. "Endogenous Leadership: Selection and Influence," IZA Discussion Papers 2732, Institute for the Study of Labor (IZA).
  4. Goodall, Amanda H., 2009. "Highly cited leaders and the performance of research universities," Research Policy, Elsevier, vol. 38(7), pages 1079-1092, September.
  5. Ben Hermalin, 1996. "Toward an Economic Theory of Leadership: Leading by Example," Working Papers _006, University of California at Berkeley, Haas School of Business.
  6. Stephen Hall & Stefan Szymanski & Andrew S. Zimbalist, 2002. "Testing the Causality between Team Performance and Payroll: The Cases of Major League Baseball and English Soccer," Journal of Sports Economics, , vol. 3(2), pages 149-168, May.
  7. Bertrand, Marianne & Schoar, Antoinette, 2003. "Managing With Style: The Effect of Managers on Firm Policies," Working papers 4280-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  8. Lawrence M. Kahn, 2000. "The Sports Business as a Labor Market Laboratory," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 75-94, Summer.
  9. David G. Blanchflower & Andrew J. Oswald & Peter Sanfey, 1992. "Wages, Profits and Rent-Sharing," NBER Working Papers 4222, National Bureau of Economic Research, Inc.
  10. Hermalin, Benjamin E., 2007. "Leading for the long term," Journal of Economic Behavior & Organization, Elsevier, vol. 62(1), pages 1-19, January.
  11. Dawson, Peter & Dobson, Stephen & Gerrard, Bill, 2000. "Estimating Coaching Efficiency in Professional Team Sports: Evidence from English Association Football," Scottish Journal of Political Economy, Scottish Economic Society, vol. 47(4), pages 399-421, September.
  12. David P. Myatt & Torun Dewan, 2007. "The Qualities of Leadership: Direction, Communication, and Obfuscation," Economics Series Working Papers 311, University of Oxford, Department of Economics.
  13. Borghans, Lex & ter Weel, Bas & Weinberg, Bruce A., 2006. "Interpersonal Styles and Labor Market Outcomes," IZA Discussion Papers 2466, Institute for the Study of Labor (IZA).
  14. Kahn, Lawrence M & Sherer, Peter D, 1988. "Racial Differences in Professional Basketball Players' Compensation," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 40-61, January.
  15. Chifeng Dai & Tracy R. Lewis & Giuseppe Lopomo, 2006. "Delegating management to experts," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 503-520, 09.
  16. Sumon Majumdar & Sharun Mukand, 2007. "The Leader as Catalyst: On Leadership and the Mechanics of Institutional Change," Working Papers 1128, Queen's University, Department of Economics.
  17. Stefan Szymanski, 2003. "The Economic Design of Sporting Contests," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1137-1187, December.
  18. Julio Rotemberg & Garth Saloner, 2000. "Visionaries, Managers, and Strategic Direction," RAND Journal of Economics, The RAND Corporation, vol. 31(4), pages 693-716, Winter.
  19. Hildreth, Andrew K G & Oswald, Andrew J, 1997. "Rent-Sharing and Wages: Evidence from Company and Establishment Panels," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 318-37, April.
  20. Barton Hughes Hamilton, 1997. "Racial discrimination and professional basketball salaries in the 1990s," Applied Economics, Taylor & Francis Journals, vol. 29(3), pages 287-296.
  21. Steven N. Kaplan & Mark M. Klebanov & Morten Sorensen, 2008. "Which CEO Characteristics and Abilities Matter?," NBER Working Papers 14195, National Bureau of Economic Research, Inc.
  22. Sherwin Rosen & Allen Sanderson, 2000. "Labor Markets in Professional Sports," NBER Working Papers 7573, National Bureau of Economic Research, Inc.
  23. Bernd Frick & Robert Simmons, 2007. "The Impact of Managerial Quality on Organizational Performance: Evidence from German Soccer," Working Papers 0708, International Association of Sports Economists;North American Association of Sports Economists.
  24. Lawrence M. Kahn, 1993. "Managerial Quality, Team Success, and Individual Player Performance in Major League Baseball," ILR Review, Cornell University, ILR School, vol. 46(3), pages 531-547, April.
  25. Francisco Pérez-González, 2006. "Inherited Control and Firm Performance," American Economic Review, American Economic Association, vol. 96(5), pages 1559-1588, December.
  26. repec:rje:randje:v:37:y:2006:3:p:503-520 is not listed on IDEAS
  27. Morten Bennedsen & Kasper Meisner Nielsen & Francisco Pérez-González & Daniel Wolfenzon, 2007. "Inside the Family Firm: the Role of Families in Succession Decisions and Performance," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 647-691, 05.
  28. Benjamin F. Jones & Benjamin A. Olken, 2005. "Do Leaders Matter? National Leadership and Growth Since World War II," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 835-864, August.
  29. Stefan Szymanski, 2000. "A Market Test for Discrimination in the English Professional Soccer Leagues," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 590-603, June.
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