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

Beyond a logic of effectiveness: Horizontal coordination, democratic legitimacy and accountability

Horizontal coordination, where actors join together to accomplish a common task, has been applauded for its output legitimacy. However, such processes often face challenges due to opposition from local actors who raise concerns about democratic legitimacy and accountability. Moving beyond a logic of effectiveness, we aim to show how and why other forms of legitimacy such as input and throughput dimensions also affect horizontal coordination, in addition to output criteria. Beyond the assumed positive relationship between coordination and effectiveness, we additionally expect horizontal coordination to be (a) impeded by local actors' fear of losing democratic legitimacy; and (b) fostered by accountability in terms of the steering capacity of the state. A comparative case study analysis of water supply structures at the regional level in Switzerland shows, in contrast to our expectation, that effectiveness has mixed impacts on horizontal coordination. Rather than being solely a positive factor for horizontal coordination, certain output criteria such as financial redistribution are found to be a key hindrance. We also find that democratic legitimacy may, indeed, impede horizontal coordination whereas increased accountability positively affects such coordination.