CEO-Firm Matches and Productivity in 42 Countries

By Amanda Dahlstrand, Dávid László, Helena Schweiger, Oriana Bandiera, Andrea Prat and Raffaella Sadun

Firms are key to economic development, and CEOs are key to firm productivity. Are firms in countries across stages of development led by the right CEOs, and if not, why? This study examines how well CEOs are matched to the firms they lead across 42 countries at different stages of economic development. The researchers develop a parsimonious survey instrument to identify two main types of CEOs: “leaders” who focus on coordinating between internal and external stakeholders, and “managers” who concentrate on monitoring and implementing internal processes.

The authors find that lower-income countries tend to have fewer leader-type CEOs. Moreover, many firms that would benefit from having a leader-type CEO, end up with a manager-type CEO instead, and vice versa. These mismatches are costly -- firms with the wrong type of CEO for their needs have up to 20% lower productivity. Overall, fixing these mismatches could increase productivity by about 10% across the sample.

The research identifies several factors contributing to these mismatches: limited access to established business schools that can train leader-type CEOs, location outside capital cities or main business centres where the CEO labour market is thinner, lack of international exposure through trade or foreign ownership, and family ownership and sole proprietorship structures that may restrict CEO selection. The findings imply that policies that improve matching could significantly enhance growth without additional resources.