As China is on an inevitable march into the digital era, firms have accumulated abundant digital assets, such as algorithms and data. Facing the possibility of using digital assets as a new type input, besides traditional inputs such as capital and labor, would powerful managers perform better? Would managerial power help managers increase the efficiency of how a firm combines traditional and digital inputs and converts them into outputs? Thus, the purpose of this study is to investigate whether powerful managers promotes corporate productivity by using digital assets as a new input.
Using data from listed Chinese firms between 2008 and 2020, the authors constructed panel regressions with three-way fixed effects to examine whether and how managerial power influences corporate productivity in the current digital context, particularly under market uncertainty.
The findings reveal no consistent relationship between managerial power and corporate productivity. The results explain this from two contrasting effects: while managerial power promotes technological change it hinders technical efficiency – two components of total productivity. Moreover, this study identifies market uncertainty as a significant external contingency. In uncertain markets, strong managerial power positively impacts corporate productivity.
The results extend extant theoretical insights in the literature on how managerial power might influence corporate productivity.
