The nexus between top managers’ human capital and firm productivity

Abstract

The author uses panel data from the World Bank enterprise survey for the Egyptian manufacturing sector in order to analyse the nexus between top managers’ human capital and productivity of firms. Pooled as well as firm fixed effects linear regressions indicate that firms are indeed on average more productive if the top manager has some kind of university degree, more experience in management activities and foreign experience in management jobs. Therefore, the overall results emphasize the importance of top managers and more generally of human capital in the determination of firm productivity.

Keywords:

• Egypt
• firm productivity
• manager characteristics
• human capital
• World Bank enterprise survey

JEL Classification:

• D22
• D24
• J24
• M12
• M50

Notes

¹ For a short summary on how managers and management practices drive productivity differences see, for example, Syverson (2011, pp. 336–339). More extensive reviews with focus on management practices can be found in Gibbons and Henderson (2013) as well as in Ichniowski and Shaw (2013).

² This limitation has already been stated by Bertrand and Schoar (2003, p. 1180): ‘Finally, and most importantly, there is no such thing as a random selection of top executives to firms. Therefore we are not hoping in this section to estimate a causal effect of managers on firm practices. Instead our objective is more modest. We want to assess whether there is any evidence that firm policies systematically change with the identity of the top managers in these firms.’

³ For more information about the World Bank enterprise survey, please see http://www.enterprisesurveys.org.

⁴ The complete regression results and descriptive statistics can be requested from the author.

⁵ The transformation exp(beta)-1 is used for this interpretation of the coefficients in log-linear specifications.