The Ties that Bind: Implicit Contracts and the Adoption of Management Technology in the Firm

Working Paper
Published on 1 November 2019


Lemos and Scur (2019) investigate how implicit contracts between firm managers and employees are linked to the adoption of productivity-enhancing organizational practices. The authors collect new data on ownership successions and show the first causal evidence that maintaining family control leads to lower adoption of managerial best practices. They use gender composition of the outgoing CEO's children as identifying variation at the succession point. They explore firm "reputation costs" as a novel mechanism constraining investment in management, and build a new proxy using data on eponymy - firms named after the family name. The authors find suggestive evidence that implicit contracts matter for management adoption.


Renata Lemos

World Bank

Daniela Scur

Cornell University