We combine unique administrative and survey data to study the match between firms and managers. The data include manager characteristics, firm characteristics, detailed measures of managerial practices, and outcomes for the firm and the manager. A parsimonious model of matching and incentives generates implications that we test with our data. We use the model to illustrate how risk aversion and talent determine how firms select and motivate managers. We show that empirical links between firm governance, incentives, and performance, which have so far been studied in isolation, can instead all be interpreted within our simple unified matching framework.

Does the “soft side” of management matter? Many managers assert that “firm culture” is strongly correlated with productivity, but there are few robust tests of this assertion. In a set of field experiments, we study driver productivity within a large US logistics company that is arguably transitioning from one relational contract to another, while leaving formal practices and incentives unchanged. We find that sites under the new contract are associated with 1/8 percent higher productivity. Our findings suggest that relational contracts have a first-order effect on productivity and that they can be altered over time.