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Organizational Capital, Corporate Leadership, and Firm Dynamics

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  • Wouter Dessein
  • Andrea Prat

Abstract

We argue that economists have studied the role of management from three perspectives: contingency theory (CT), an organization-centric empirical approach (OC), and a leader-centric empirical approach (LC). To reconcile these three perspectives, we augment a standard dynamic firm model with organizational capital, an intangible, slow-moving, productive asset that can be produced only with the direct input of the firm’s leadership and that is subject to an agency problem. We characterize the steady state of an economy with imperfect governance and show that it rationalizes key findings of CT, OC, and LC as well as generates a number of new predictions on performance, management practices, chief executive officer behavior and compensation, and governance.

Suggested Citation

  • Wouter Dessein & Andrea Prat, 2022. "Organizational Capital, Corporate Leadership, and Firm Dynamics," Journal of Political Economy, University of Chicago Press, vol. 130(6), pages 1477-1536.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/718985
    DOI: 10.1086/718985
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    Cited by:

    1. Morjaria, Ameet & Macchiavello, Rocco, 2022. "Acquisitions, Management, and Efficiency in Rwanda's Coffee Industry," CEPR Discussion Papers 17434, C.E.P.R. Discussion Papers.

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