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Firm location quality, founding family firms, and management team expertise

Author

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  • Chen, Tsung-Kang
  • Tseng, Yijie
  • Hsieh, Yu-Ting

Abstract

We investigate whether firm location quality affects the management team expertise by employing 15,433 Taiwanese companies from 2006 to 2018. We find that the remoteness of a firm’s location positively relates to management team expertise, suggesting that the effect of managerial entrenchment (observable or hidden compensation) dominates that of the small human pool in rural firms, which thereby attract managers with greater expertise to join rural firms. In addition, the effect of firm location quality on management team expertise becomes weaker when the firm is controlled by the founding family (i.e. the firm’s CEO is the founder or the founder’s descendant), implying that non-family managers may view family firms as an unattractive option because of the limited potential to progress in the company. Finally, our results hold with the consideration of endogeneity issues.

Suggested Citation

  • Chen, Tsung-Kang & Tseng, Yijie & Hsieh, Yu-Ting, 2023. "Firm location quality, founding family firms, and management team expertise," The Quarterly Review of Economics and Finance, Elsevier, vol. 88(C), pages 177-189.
    • Handle: RePEc:eee:quaeco:v:88:y:2023:i:c:p:177-189
    DOI: 10.1016/j.qref.2023.01.004
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    More about this item

    Keywords

    Firm location quality; Founding family firms; Management team expertise; Geography characteristics; Managerial entrenchment;
    All these keywords.

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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