Limited managerial attention and corporate aging

As firms have more assets in place, more of management’s limited attention is focused on managing assets in place rather than developing new growth options. Consequently, as firms grow older, they have fewer growth options and a lower ability to generate new growth options. This simple theory predicts that Tobin’s q falls with age. Further, competition in the product market is expected to slow down the decrease in Tobin’s q because it forces firms to look for alternative sources of rents. Similarly, greater competition in the labor market reduces the decrease in Tobin’s q with age because old firms are in a better position to hire employees that can help with innovation. In contrast, competition in the market for corporate control should accelerate the decline because it forces management to focus more on managing assets in place whose performance is more directly observable than on developing growth options where results may not be observable for some time. We find strong support for these predictions in tests using exogenous variation in competition.

Limited managerial attention and corporate aging

As firms have more assets in place, more of management’s limited attention is focused on managing assets in place rather than developing new growth options. Consequently, as firms grow older, they have fewer growth options and a lower ability to generate new growth options. This simple theory predicts that Tobin’s q falls with age. Further, competition in the product market is expected to slow down the decrease in Tobin’s q because it forces firms to look for alternative sources of rents. Similarly, greater competition in the labor market reduces the decrease in Tobin’s q with age because old firms are in a better position to hire employees that can help with innovation. In contrast, competition in the market for corporate control should accelerate the decline because it forces management to focus more on managing assets in place whose performance is more directly observable than on developing growth options where results may not be observable for some time. We find strong support for these predictions in tests using exogenous variation in competition

Language as a barrier and facilitator for women's career progress

Purpose When applying for leadership positions or acting as leaders, women are still perceived with a ‘lack of fit’, thus hired less likely and evaluated less favorably than their male counterparts. In many languages, different language forms can be used to refer to both women and men: masculine forms (e.g., CEO in German: ‘Geschäftsführer’) and alternative forms (e.g., feminine‐masculine word pairs, CEO in German ‘Geschäftsführerin/Geschäftsführer’). We assumed that the use of masculine forms endorses the ‘lack of fit’ for women in leadership, whereas alternative forms reduce it. Design/Methodology Two studies tested the hypotheses by manipulating language forms (masculine forms vs. alternative forms) and gender of the target to hire/evaluate (female vs. male). Results The results indicated as predicted that masculine forms lead to the ‘lack of fit’ for women in the leadership context, whereas alternative forms reduce it. Women were less likely to be employed for leadership positions (Study 1) and evaluated less favorably as leaders (Study 2) than their male counterparts with masculine forms. However, with alternative forms no differences in employment decisions and evaluations of women and men were found. Limitations These two studies were conducted with student‐samples. Further research is needed to replicate effects with relevant samples as HRmanagers and to investigate underlying mechanisms. Research/Practical Implications Organizations may use alternative forms instead of masculine forms in job advertisements for leadership positions to overcome barriers for women in leadership. Originality/Value These are the first studies in testing the effects of language forms in the leader selection and evaluation.

Three essays on prices and selection

Competitive Market Segmentation Abstract In a two-firm model where each firm sells a high-quality and a low-quality version of a product, customers differ with respect to their brand preferences and their attitudes towards quality. We show that the standard result of quality-independent markups crucially depends on the assumption that the customers' valuation of quality is identical across firms. Once we relax this assumption, competition across qualities leads to second-degree price discrimination. We find that markups on low-quality products are higher if consuming a low-quality product involves a firm-specific disutility. Likewise, markups on high-quality products are higher if consuming a high-quality product creates a firm-specific surplus. Selection upon Wage Posting Abstract We discuss a model of a job market where firms announce salaries. Thereupon, they decide through the evaluation of a productivity test whether to hire applicants. Candidates for a job are locked in once they have applied at a given employer. Hence, such a market exhibits a specific form of the bargain-then-ripoff principle. With a single firm, the outcome is efficient. Under competition, what might be called "positive selection" leads to market failure. Thus our model provides a rationale for very small employment probabilities in some sectors. Exclusivity Clauses: Enhancing Competition, Raising Prices Abstract In a setting where retailers and suppliers compete for each other by offering binding contracts, exclusivity clauses serve as a competitive device. As a result of these clauses, firms addressed by contracts only accept the most favorable deal. Thus the contract-issuing parties have to squeeze their final customers and transfer the surplus within the vertical supply chain. We elaborate to what extent the resulting allocation depends on the sequence of play and discuss the implications of a ban on exclusivity clauses.

Looking too Old? How First Impressions of Older-looking Candidates Contribute to Unfavorable Selection Decisions

Building on theories of impression formation based on faces, this research investigates the impact of job candidates’ facial age appearance on hiring as well as the underlying mechanism. In an experiment, participants decided whether to hire a fictitious candidate aged 50 years, 30 years or without age information. The candidate’s age was signaled either via chronological information (varied by date of birth) or via facial age appearance (varied by a photograph on the résumé). Findings showed that candidates with older-appearing faces—but not chronologically older candidates—triggered impressions of low health and fitness, compared to younger-appearing candidates. These impressions reduced perceptions of person-job fit, which lowered hiring probabilities for older-appearing candidates. These findings provide the first evidence that trait impressions from faces are a determinant of age discrimination in personnel selection. They call for an extension of current models of age discrimination by integrating the effects of face-based trait impressions, particularly with respect to health and fitness.