Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management
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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- 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
25477, London School of Economics and Political Science, LSE Library.
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- Bloom, Nicholas & Garicano, Luis & Sadun, Raffaella & Van Reenen, John, 2013. "The distinct effects of Information Technology and Communication Technology on firm organization," CEPR Discussion Papers 9762, C.E.P.R. Discussion Papers.
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- Luis Garicano, 2000. "Hierarchies and the Organization of Knowledge in Production," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 874-904, October.
- Jacques Cremer & Luis Garicano & Andrea Prat, 2006.
"Language and the Theory of the Firm,"
784828000000000373, UCLA Department of Economics.
- 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, June.
- Dessein, Wouter & Garicano, Luis & Gertner, Robert, 2007.
"Organizing for Synergies,"
CEPR Discussion Papers
6019, C.E.P.R. Discussion Papers.
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