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Managerial Talent and Managerial Practices: Are They Complements?

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  • Baltrunaite, Audinga
  • Bovini, Giulia
  • Mocetti, Sauro
Abstract
We examine the role of managerial talent and its interaction with managerial practices in determining firm performance. We build a matched firm-director panel dataset for the universe of limited liability companies in Italy, tracking individuals across different firms over time. We define managerial talent as management's capacity to boost firms' total factor productivity, estimated using a two-way fixed effects model. Combining the data with survey information on a representative sample of firms, we then document that our measure of talent correlates with ex-ante and ex-post indicators of ability, i.e. managers' educational attainment and their forecast precision with respect to the firm's future performance. Most important, we leverage information on the adoption of managerial practices within the firm to examine potential synergies between managerial talent and structured managerial practices, thus bridging two separate strands of the literature. While talent and structured practices do boost firm productivity on their own, there is evidence of complementarities between the two. These findings hold both in a cross-sectional setting and in a panel analysis that accounts for time-invariant firm heterogeneity. Overall, our results indicate that the effectiveness of managerial practices depends on managers' ability to implement them.

Suggested Citation

  • Baltrunaite, Audinga & Bovini, Giulia & Mocetti, Sauro, 2021. "Managerial Talent and Managerial Practices: Are They Complements?," CEPR Discussion Papers 16064, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16064
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    Cited by:

    1. Johannes Carow, 2024. "A critical assessment of the two-way fixed-effects model for firm-level dependent variables," Working Papers 2405, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    2. Audinga Baltrunaite & Mario Cannella & Sauro Mocetti & Giacomo Roma, "undated". "Board composition and performance of state-owned enterprises: Quasi-experimental evidence," Temi di discussione (Economic working papers) 1328, Bank of Italy, Economic Research and International Relations Area.
    3. Audinga Baltrunaite & Sara Formai & Andrea Linarello & Sauro Mocetti, 2022. "Ownership, Governance, Management and Firm Performance: Evidence from Italian Firms," Questioni di Economia e Finanza (Occasional Papers) 678, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    Board of directors; Managers; Corporate governance; Productivity; Managerial practices;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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