Old captains at the helm: chairman age and firm performance

This paper examines whether the chairmen of the boards (COBs) impose their life cycles on the firms over which they preside. Using a large sample of unlisted firms, we find a robust negative relation between COB age and firm performance. COBs age much like ‘ordinary’ people. Their cognitive abilities deteriorate, and they experience significant shifts in motivation. Deteriorating cognitive abilities are the main driver of the performance effect that we observe. The results imply that succession planning problems in unlisted firms are real. Mandatory retirement age clauses cannot solve these problems.

Target difficulty, intra-year target revisions and firm performance: evidence from business units' targets

Target difficulty is often argued to increase performance. While this association is well established in experimental research, empirical evidence in field research is rather mixed. We attempt to explain this inconsistency by analyzing the importance of intra-year target revisions, which are especially prevalent in real-world field settings. Using survey and archival data from 97 firms, we find that firms with more challenging business unit targets revise targets more often, in line with asymmetric, downward target revisions. Results further show that the degree to which targets are revised during a period results in negative effects on firm performance, as the anticipation of revision negatively affects the business unit management’s performance incentives. Additionally, we find that using targets predominantly for either decision-making or control influences the overall performance effects of target revisions. Our findings may partially explain the mixed field study evidence regarding the effects of target difficulty.

Entrepreneurship in a Hub-and-Spoke Industrial District: Firm Survey Evidence from Seattle's Technology Industry

Mayer H. Entrepreneurship in a hub-and-spoke industrial district: firm survey evidence from Seattle's technology industry, Regional Studies. The paper investigates entrepreneurial dynamics in a hub-and-spoke industrial district. Using data on the genealogy of high-technology firms in Seattle, Washington State, the study examines the ways in which entrepreneurial firms relate to their parent firms and the role of agglomeration economies. The results illustrate that entrepreneurship is an important vehicle for the diversification of such a district. When compared, hub-related spinoffs such as those founded by former Microsoft employees do not differ much from other start-ups. The differences between Microsoft spinoffs and start-ups are very limited; both diversify the regional economy by entering new markets when compared with their parents.

Executive compensation and the performance of the firm

A sample of large industrial corporations is examined to determine whether there is a relationship between the levels of compensation received by the senior executives of those firms and the firms' economic performances. We find consistent evidence of such a relationship, with differences across firms in the total compensation of their three highest-paid officers being positively related to differences in both the common stock returns and operating profitability of the firms. The implication is that compensation packages are designed to reduce agency costs.