Is CEO education relevant for productivity?

Written on 07 November 2014.


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Is CEO education relevant for productivity?

Despite the dominance of family firms, most academic research is not targeted to them and they remain largely unknown in the literature. Research regarding the specificities of management and governance practices of family firms is especially scarce. The EDHEC Family Business Center undertakes research on management quality within family firms, developing issues such as governance, management, succession, finance and family business role in society. PhD. Lopez-de-Silanes, F. and Dr. Timothée Waxin have recently published interesting papers on these issues.
Is CEO education relevant for productivity?
Lopez-de-Silanes, F. (2014)
Abstract
Financiers and economists have speculated about the factors that may explain the documented large differences in productivity across firms. Differences in productivity are a central topic for family firms as they face the classic trade-off of family ownership. In this paper, we investigate the determinants of firm productivity using a newly constructed database of close to 50,000 firms around the world. We combine this data with sub-national regional geographic, institutional, cultural, and human capital variables that may impact firm productivity in a cross-section of over 1500 different regions in close to 100 countries. The econometric estimates show that top management education is a critical factor explaining firm-level differences in factor productivity: the contribution of managerial education (i.e. CEOs and top management) to firm productivity is close to five times that of non-management firm workers. These results imply that investment in the education of future family-firm managers, or hiring outside managers with high human capital may prove to be a profitable policy for family firms, leading to significant productivity enhancements. The human capital of future family generations is thus crucial when ensuring the survival of the firm under family control.
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