Import Competition, Heterogeneous Preferences of Managers, and Productivity

71 Pages Posted: 14 Jan 2020

See all articles by Claudia Steinwender

Claudia Steinwender

Ludwig Maximilian University of Munich (LMU)

Cheng Chen

Clemson University

Date Written: January 2020

Abstract

When managers have objectives beyond maximizing monetary profits, inefficiencies may arise. An increase in competition may then force managers to improve the productivity of the firm in order to ensure survival. While this hypothesis has received ample theoretical attention, empirical evidence is scarce, mainly because preferences of managers are typically unobserved. In this paper, we exploit the fact that a large literature has documented specific non-monetary preferences of family managers. Using Spanish firm-level data, we compare how family-managed and professionally-managed firms react to import competition shocks. We find that import competition leads to productivity increases in family-managed firms that are initially unproductive. Productivity improvements are driven by family management as opposed to family ownership or non-managing family members. Furthermore, we show that these managers increase efficiency by reducing material usage, which is consistent with them trying to increase their short-term cash flow in order to survive. Finally, productivity improvements seem to be particularly pronounced in multi-generational family firms that also introduce organizational changes.

Keywords: family firms, import competition, Managers, productivity

JEL Classification: D22, D23, F14, L21, L22

Suggested Citation

Steinwender, Claudia and Chen, Cheng, Import Competition, Heterogeneous Preferences of Managers, and Productivity (January 2020). CEPR Discussion Paper No. DP14285, Available at SSRN: https://ssrn.com/abstract=3518626

Claudia Steinwender

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Cheng Chen (Contact Author)

Clemson University ( email )

101 Sikes Ave
Clemson, SC 29634
United States

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