Essays on managerial productivity and firm outcomes

This dissertation studies internal and external factors affecting firm outcomes. The first two chapters explore the sources of variation in managerial skill within an Indian life insurance firm. The existing literature has investigated the association between managerial productivity and management practices across firms, but has largely overlooked how individual traits and skills affect managerial performance. Intra-firm variation in managerial productivity allows us to study managerial skill without the confounded effects of variation in management practices. The third chapter models how external technological change affects competition between media firms, and what that implies for information availability in a society. For the first two chapters, I use a novel dataset drawn from a life insurance firm in India, with 211 managers, each leading a sales team of insurance agents. Chapter 1 studies the sources of large variation in performance across teams. I find that the performance of newly recruited agents is positively correlated with the managers' past team productivity index. I also observe that when agents move across teams in the firm's internal labor market, there is no change in the output of such agents, except when they join the team of a high performing manager (in the top decile of team performance). This allows me to infer that most managers differ from along their recruiting skill, whereas the high performers are able to provide some form of managerial contribution to productivity such as training, supervision or guidance. Chapter 2 examines the dynamics of managerial skills in this firm. I distinguish between internally-hired managers who were working previously as agents in the firm, and externally-hired managers, who joined the firm directly as managers. I find that the teams of internally-hired managers are 14% more productive, but that the teams of externally-hired managers catch up in a span of six to seven years. Among different mechanisms, I find evidence that the managers differ in the recruitment of good workers and also in the contribution to the output of their workers. Further, I find evidence that the externally-hired managers learn how to recruit good workers. This is the first study to show evidence supporting learning-by-doing on part of managers. The third chapter, co-authored with Benjamin Ogden, develops a model of endogenous media polarization- or, product differentiation among news sources- to study how this affects political outcomes. We show that under internet-based technology, where users provide additional values when they are served their preferred content, media firms would have an incentive to skew their content, leading to divergence. However, the degree of divergence will depend on the distribution of audience. Under reasonable restrictions on the distribution of voters, informed political choices are implemented. The model demonstrates why increasing media polarization does not necessarily lead to incorrect political outcomes and may in fact create conditions for correct policy choice