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Technological Fit and the Market for Managerial Talent
Published online by Cambridge University Press: 10 May 2022
Abstract
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We show that the similarity of a firm’s technological expertise with that of other firms affects managerial labor market outcomes. Using each firm’s patent portfolio to estimate its technological expertise, we find that its similarity in technological expertise with other firms is strongly related to the benchmark group used for CEO compensation and job transitions. Furthermore, we show that a firm’s CEO pay is positively associated with the CEO compensation levels of technologically similar firms. Our results thus demonstrate the crucial role of technological similarity in determining the value of outside options and the boundaries of the managerial labor market.
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This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (https://creativecommons.org/licenses/by/4.0), which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.- Copyright
- © THE AUTHOR(S), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington
Footnotes
We thank an anonymous referee, Melissa Frye, Vladimir Gatchev, Jarrad Harford (the editor), John Howe, Po-Hsuan Hsu, Sima Jannati, Stefano Sacchetto, Henri Servaes, Qinghai Wang, Jessica West, Chi Zhang, and seminar and conference participants at the 2020 Financial Management Association Conference, 2020 Annual Conference of the Asia-Pacific Association of Derivatives, 2020 Conference on Asia-Pacific Financial Markets (CAFM), Korea Advanced Institute of Science and Technology (KAIST), Korea University, Seoul National University, University of Central Florida, University of Mississippi, University of Missouri, University of Seoul, University of Sydney, and Virginia Commonwealth University for valuable comments. Jong-Min Oh gratefully acknowledges financial support from the JOONGBONG Research Fund, SKK Business School.
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