Performance, Career Dynamics, and Span of Control

Abstract

In this paper we focus on a classic idea concerning span of control, which is that a prime driver is the scale of operations effect. We extend the theory concerning the scale of operations effect by allowing firms’ beliefs concerning a manager’s ability to evolve over the manager’s career. We empirically investigate the resulting testable predictions using a unique single-firm data set that contains detailed information concerning the reporting relationships at the firm. Our empirical analysis supports the notion that the scale of operations effect and learning are both important determinants of a firm’s span of control.

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