Research Overview


The Evolution of Corporate Structure, Internal Governance, and Leadership

My research documents the evolution of the internal governance of senior management in large US firms over a 20-year period and explores, via multiple methods, the causes and consequences of these changes. My findings suggest that firms, in response to increased competition from globalization and reduced costs of information technology, have adopted a structure at the top that is distinct from the traditional, highly-decentralized multidivisional organization documented by Chandler (1962). In large-sample, longitudinal studies of Fortune 500 firms, I show that CEOs have substantially changed the structure and incentives at the top as they shift strategies toward less diversified portfolios. They have “flattened” their firms: they reduced the number of management levels, doubled the size of their executive teams while changing the composition, and substantially increased performance-based pay. To investigate the implications for decision-making, I complement the large-sample research with CEO interviews – what CEOs “say” – and a survey of CEO time use – what CEOs “do.” Taken together, the evidence from multiple methods suggests that large US firms have shifted toward a structure that relies on greater coordination among the top team and a more involved CEO. Another novel insight from this research is that “delayering” at the very top of the pyramid – typically associated with the delegation of authority – is a complex phenomenon that is more indicative of centralization.

  • The Flattening Firm: Evidence from Panel Data on the Changing Nature of Corporate Hierarchies, [Written with Raghuram G. Rajan], The Review of Economics and Statistics, 88, no. 4 (November 2006): 759-773. Journal Article in pdf format.
  • The Flattening Firm and Product Market Competition: The Effect of Trade Liberalization on Corporate Hierarchies, [Written with Maria Guadalupe], American Economic Journal: Applied Economics, 2, (October 2010): 105-127. Journal Article pdf format.
  • Who Lives in the C-Suite? Organizational Structure and the Division of Labor in Top Management, [Written with Maria Guadalupe and Hongyi Li], Management Science (forthcoming). Paper in pdf format.
  • Span of Control and Span of Attention [Written with Oriana Bandiera, Andrea Prat, and Raffaella Sadun], Harvard Business School Working Paper, No. 12-053, December 2011. (Revised February 2012, February 2014.) Working Paper in pdf format.
  • The Flattening Firm–Not As Advertised, California Management Review, 55 no. 1, (Fall 2012). Journal Article in pdf format.
  • How Many Direct Reports, [Written with Gary L. Neilson], Harvard Business Review, 90, no. 4 (April 2012). Journal Article in pdf format.

Non-Financial Incentives

My research shows how firms combine many facets of internal governance to motivate managers. A perspective that underlies much of my research is that managers are not motivated by financial rewards alone: “it’s not just about the money.” Armed with this perspective, I have investigated compensation design in conjunction with other governance aspects that managers care about. For example, I study perquisites that increase managerial productivity or enhance status (e.g., corporate jets and chauffer services); location decisions that acknowledge social factors (i.e., managerial concern for employee welfare and visibility in the community); the effect of peer comparisons in the setting of executive pay; decision rights or “the right to be the boss” in mergers and acquisitions; the size of divisional investment budgets in internal capital markets; and the position in the organizational hierarchy. Taken together, these papers provide compelling evidence of the importance of non-financial rewards in motivating managers.

  • Perquisites, Social Factors & Geography, Peer Comparison
    • Are Perks Purely Managerial Excess? [Written with Raghuram G. Rajan], Journal of Financial Economics 79, no. 1 (January 2006): 1-33. (Winner of Second Place 2006 Jensen Prize for “Best Paper on Corporate Finance and Organizations” presented by Journal of Financial Economics .) Journal Article in pdf format.
    • Trade-offs in Staying Close: Corporate Decision Making and Geographic Dispersion [Written with Augustin Landier and Vinay Nair], Review of Financial Studies Vol. 22 No.3 (March 2009): 1119-1148. Journal Article in pdf format.
    • Pay Harmony? Social Comparison and Performance Compensation in Multibusiness Firms, [Written with Claudine Gartenberg], Organization Science, Vol 28, Issue 1, (Jan-Feb 2017): 1-176. Journal Ariticle in pdf format.
    • Competition and Pay Inequality Within and Between Firms, [Written with Claudine Gartenberg], Management Science, 66 (12) 5925-5943; (June, 2020): Journal Article in pdf format.
    • Pay Inequality and Corporate Divestitures, [Written with Feldman, Emilie R., and Claudine Gartenberg], Strategic Management Journal, 39 (11), (July 2018), 2829-2858. Journal Article in pdf format.
  • Decision Rights in M&A (or “the right to be the boss”)
    • How Do Acquirers Retain Successful Target CEOs? The Role of Governance, [Written with Harbir Singh], Management Science, 57, no. 12 (December 2011): 2011-2114. Journal Article in pdf format
    • Do CEOs in Mergers Trade Power for Premium? Evidence from ‘Mergers of Equals’, Journal of Law, Economics and Organization, 20, no. 1 (April 2004): 60-101. Journal Article in pdf format.

Financial Incentives

My research examines how the performance effects of internal governance and the design of compensation vary by managerial position. For example, I document links between innovation and stock options for corporate R&D heads; resource allocation in internal capital markets and the performance measures for division manager bonuses; and earnings management and bonuses for CFOs. Overall, these findings are significant because they demonstrate the complementary nature of internal governance choices, the importance of recognizing non-monetary incentives, and the differential incentive effects across managerial positions.

  • Innovation and Incentives: Evidence from Corporate R&D, [Written with Josh Lerner], The Review of Economics and Statistics, 89, no. 4 (November 2007): 634-644. Journal Article in pdf format.
  • Influence and Inefficiency in the Internal Capital Market, Journal of Economic Behavior and Organization, 72, no.1 (October 2009): 305-321. Journal Article in pdf format.
  • Internal Capital Markets and Firm-Level Compensation Incentives for Division Managers, Journal of Labor Economics, 20, no. 2 (April 2002): S219-S262. Journal Article in pdf format.
  • Authority, Risk, and Performance Incentives: Evidence from Division Manager Positions Inside Firms, Journal of Industrial Economics, 55, no. 1(March 2007): 169-196. Journal Article in pdf format.
  • Earnings Management from the Bottom Up: An Analysis of Managerial Incentives Below the CEO [Written with Felix Oberholzer-Gee], Harvard Business School Working Paper 12-056). Working Paper in pdf format.

All Publications