Advances in Management Accounting

Laurie L. Burney

• Publisher: Emerald Publishing Limited
• Year: 2020
• Print ISBN: 9781839829130
• eBook ISBN: 9781839829147
• Topic: Business
• Subtopic: Management
• Index: Business

Advances in Management Accounting (AIMA) is a publication of quality applied research in management accounting. The journal's purpose is to publish thought-provoking articles that advance knowledge in the management accounting discipline and are of interest to both academics and practitioners. As a premier management accounting research journal, AIMA is well-poised to meet the needs of management accounting scholars.

Featured in Volume 32 are articles on:

Public Sector Joint Ventures; Control; Trust; Perceived Risk; Cost Stickiness; Cost Behavior; Environmental, Social, and Governance (ESG) Sustainability Performance; Information Asymmetry; Sustainability Disclosure; Corporate Social Responsibility (CSR); Asymmetric Cost Behavior; Lease Cost Stickiness; Retail Firms Cost Stickiness; Mood; Sunshine; Managerial Optimism; Asymmetric Cost Behavior; Adjustment Costs; Academic Research, Research-Practice Gap; Rigor-Relevance; Impact; Engagement; Relational Performance Measurement System; Managerial Ability; Employee Productivity; Employee Efficiency; Employee Cost; Financial Distress; Environmental Uncertainty.

MANAGERIAL ABILITY AND EMPLOYEE PRODUCTIVITY^*

Dipankar Ghosh, Xuerong (Sharon) Huang and Li Sun

ABSTRACT

Purpose – This study examines how managerial ability relates to employee productivity using a broad and generalized sample of US firms.

Methodology – This study employs a generalized sample of firm-years from all industries between 1980 and 2013.

Findings – By contending that managers differ in their ability to synchronize management processes and human capital in ways that enhance employee productivity, the authors provide evidence showing that more-able managers are associated with higher employee productivity. In addition, the authors find that high-ability managers moderate the negative relation between uncertain environments (high-technology firms) and employee productivity. Furthermore, the authors decompose employee productivity into employee efficiency components and employee cost components. The authors find a significant positive association between managerial ability and the employee efficiency component, but do not see a significant association between managerial ability and the employee cost component.

Value – The results contribute to the understanding of employee productivity by showing the relation between managerial ability and employee productivity.

Keywords: Managerial ability; employee productivity; employee efficiency; employee cost; financial distress; environmental uncertainty

1. INTRODUCTION

The supply of managerial services, particularly in the upper echelons of a firm, has long been recognized as a critical requirement for firms to grow and diversify (Helfat & Peteraf, 2015; Holcomb, Holmes, & Connelly, 2009; Penrose, 1959). Research also recognizes that managers are idiosyncratic in their abilities to build, integrate, reconfigure, and competitively reposition firms’ resources and capabilities (Adner & Helfat, 2003; Butler & Ghosh, 2015; Dyreng, Hanlon, & Maydew, 2010; Kahneman & Tversky, 1984). Helfat and Peteraf (2015) attribute this ability to “managerial cognitive capability” or the capacity to perform both physical and mental activities. Despite the growing literature recognizing the idiosyncrasy of managers and the normative connection between managers’ ability and employee productivity, empirical studies in this area remain sparse.¹

Initial insights on this relation from Penrose (1959, p. 5) observe that

the resources with which a particular firm is accustomed to working will shape the productive services its management is capable of rendering … but also the experience of management will affect the productive services that all its other resources are capable of rendering.

Barney (1991, p. 117) asserts that a manager’s ability to understand and efficiently use the firm’s resources “has the potential for generating sustained competitive advantages” for a firm. Managing human resources is centrally important to the execution of firm-level strategy and improving employee productivity (Koch & McGrath, 1996). However, there is no research concerning managers’ operating abilities that forges a link between human capital resources and their productivity.

Our core premise is that more-able managers can manage their employees more efficiently than less able managers. Castanias and Helfat (2001, p. 665) argue that “the skills of top management combined with other firm assets and capabilities jointly have the potential to generate rent.” This statement suggests that possessing valuable, rare, inimitable, and non-substitutable resources is a necessary but insufficient condition for creating performance value. Indeed, the value is created when resources are evaluated, manipulated, and deployed appropriately only by managers within the firm’s context (Lippman & Rumelt, 2003). In addition, our research explores when a manager’s ability matters most to employee productivity, which is for firms operating in the high-technology industry or under uncertain environments. In these circumstances, more-able managers can better recognize changes in the business environment, resulting in decisions that are positively refle...

Table of contents

• Cover
• Title
• Understanding the Interactions between Control, Trust, and Perceived Risk in Public Sector Joint Ventures
• Is Cost Stickiness Associated with Sustainability Factors?
• Are Operating Lease Costs Sticky for Retail Firms?
• A Look on the Bright Side – The Real Effect of Mood on Corporate Short-Term Resource Adjustment Decisions: Research Note
• A Performance Measurement Approach to Defining and Measuring Research Relevance: Evidence from University Senior Management
• Managerial Ability and Employee Productivity