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Abstract
The role of the manager in promoting production is a little-understood phenomenon. In particular, it is difficult to separate managers' contributions from the abilities of the workers they supervise. Firms may therefore mistakenly attribute the contributions of the workers to the managers who happen to oversee them. With its plethora of performance data, the National Basketball Association (NBA) provides a natural setting to measure the contribution of a head coach to the performance of his team. We find that some highly regarded coaches deserve their accolades, but several coaches owe their success to managing highly talented teams. Conversely, some coaches with mediocre records have made significant contributions to the performance of their players. Most coaches, however, do not have a statistically significant impact on their players or their teams, making them nothing more than the "principal clerks" that Adam Smith called managers over 200 years ago.
Keywords: coaching efficiency, National Basketball Association, productivity
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Introduction: The Role of Managers
The reputation of corporate managers goes through periodic upswings and downturns. As noted by Ira Horowitz (1994b), Adam Smith argued managers play an inconsequential role in the performance of a firm. Specifically, Smith separated the role of the entrepreneur from that of the manager. In Smith's view, entrepreneurs provide both the fundamental ideas and capital the organization requires for success. Beneath the entrepreneur is a group of subordinates that oversees daily operations. From Smith's perspective, this group of subordinates does not vary in any significant way from organization to organization. In essence, the managers of daily operations are little more than "principal clerks" (Smith, 1976, pp. 54-55). This view of managers has persisted in the neoclassical model of the firm in which "top managers are homogeneous inputs into the production process" (Bertrand & Schoar, 2003, p. 1173).
With its emphasis on static equilibrium, neoclassical theory assumes away any role for managers. In this setting, managers ensure firms operate in a technically and economically efficient manner. That is, they extract maximal output from a given set of inputs and minimize the cost of a given level of output. For a given set of inputs, a given technology, and given prices, all managers behave in exactly the same manner.
In contrast to...