Making The Most of What You Have

Strategic Management Journal
Strat. Mgmt. J., 30: 457–485 (2009)

Published online 30 December 2008 in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/smj.747
Received 13 September 2007; Final revision received 19 November 2008
MAKING THE MOST OF WHAT YOU HAVE:

MANAGERIAL ABILITY AS A SOURCE OF RESOURCE
VALUE CREATION
TIM R. HOLCOMB,1 * R. MICHAEL HOLMES JR.,2 and BRIAN L. CONNELLY3
1
College of Business, Florida State University, Tallahassee, Florida, U.S.A.
2
E.J. Ourso College of Business, Louisiana State University, Baton Rouge, Louisiana,
U.S.A.
3
College of Business, Auburn University, Auburn, Alabama, U.S.A.
The current study investigates a central premise of the resource-based view of the firm—that
managers are a potential source of value creation for the firm. Using data from professional
sports teams, we test theory regarding the effects of managerial ability, human resource stocks,
and managers’ actions on resource value creation. While results indicate managerial ability
affects resource productivity, this effect is less pronounced with increases in the quality of
firm resources. Further, we investigate the extent to which managerial actions that synchronize
resource bundles account for the influence of managerial ability and resource context on a firm’s
performance advantage. These results contribute to our understanding of resource management
and provide empirical evidence for the importance of managerial ability in the resource-based
view. Copyright  2008 John Wiley & Sons, Ltd.
INTRODUCTION profiles, identifying important resource charac-

teristics that explain differences in firm perfor-
mance (Peteraf, 1993; Peteraf and Barney, 2003).
Despite intuitive appeal, this reasoning has pro-
Efficient production with heterogeneous resources duced equivocal results (see Newbert, 2007 for a
is a result not of having better resources review), leading some to criticize resource-based
but in knowing more accurately the relative theory as overly focused on the characteristics
productive performances of those resources of resources (e.g., Priem and Butler, 2001) and
(emphasis included in the original, Alchian ‘remarkably naïve’ about how they are used (e.g.,
and Demsetz, 1972: 793). Barney and Arikan, 2001: 175). More recently,
scholars have added that while owning or having
Management research has a long history of using access to valuable and rare resources is necessary
resource-based theory to explain differences in for competitive advantage, they must be effectively
organizational outcomes (Barney, 1991; Barney, managed and synchronized to realize a competitive
Wright, and Ketchen, 2001). To do so, scholars advantage (e.g., Hansen, Perry, and Reese, 2004;
focus attention on the heterogeneity of resource Kor and Mahoney, 2005; Mahoney, 1995). How-
ever, despite recent efforts to integrate managerial
processes into a theory of resource management
Keywords: managerial ability; resource management; (e.g., structuring, bundling, and leveraging; see
value creation; resource productivity; synchronization Sirmon, Hitt, and Ireland, 2007), scholars work-
*Correspondence to: Tim R. Holcomb, College of Business,
Florida State University, Tallahassee, FL 32306-1110, U.S.A. ing in the resource-based tradition have not fully
E-mail: tholcomb@cob.fsu.edu explored the actions firms take to create and sustain
Copyright  2008 John Wiley & Sons, Ltd.

458 T. R. Holcomb, R. M. Holmes Jr., and B. L. Connelly
an advantage or when those actions matter most. 2005: 600) or ‘islands’ (Postrel, 2002: 303) of dis-
The current study addresses this void by focus- tinct but interdependent activities. Indeed, firms
ing on managerial ability as a source of resource realize a performance advantage when managers
value creation. Building on extant literature, we synchronize the resource management processes
describe a model wherein the extent of a per- within and between interdependent bundles such
formance advantage that a firm enjoys depends that organizational performance is optimized.
on the ability of managers to create value from Our core premise is that managers differ in their
resources the firm controls. Penrose (1959) pro- ability to manage resources and to synchronize
vided initial insights on this relationship, noting management processes in ways that enhance orga-
that ‘the resources with which a particular firm nizational performance. Managerial ability derives
is accustomed to working will shape the produc- from experience and is tacit in nature, making it
tive services its management is capable of render- rare and difficult to imitate, suggesting that man-
ing . . . but also that the experience of manage- agerial ability is itself an important resource (Hitt
ment will affect the productive services that all et al., 2001; Kor, 2003). We rely on resource-based
its other resources are capable of rendering’ (Pen- theory and research that examines the managerial
rose, 1959 : 5). Stressing the importance of man- ability construct to build arguments about when
agers to the resource-based view, Barney (1991) and how managers create a performance advantage
reasoned that a manager’s ability to understand for their firms. In doing so, our work makes sev-
and effectively use firm resources is itself a valu- eral important contributions. First, we demonstrate
able resource that ‘has the potential for generating that managerial ability can be a source of value
sustained competitive advantages’ for a firm (Bar- creation when it allows superior bundling and
ney, 1991 : 117). Although resource-based theory deployment of resources. While scholars work-
holds a place for managers, work in this area sel- ing from a resource-based perspective have estab-
dom examines managerial attributes that underlie lished the importance of resource heterogeneity
resource value creation. and recognize that resources have a latent potential
From a firm’s perspective, managers create value to create value (Peteraf, 1993), we focus special
by developing resource bundles that enable firms attention on the contribution of managerial abil-
to undertake ‘novel and appropriate tasks, services, ity in extracting latent value from resources that
jobs, products, processes, or other contributions firms control. Additionally, our theory and anal-
perceived to be of value’ and that produce greater yses explore when able managers matter most.
utility or lower unit costs in use (Lepak, Smith, In particular, we reason that the influence of
and Taylor, 2007: 183).1 Resource bundles repre- managerial ability on resource value creation is
sent unique combinations of resources that enable greater with less valuable resources, presumably
firms to take advantage of specific market oppor- because able managers enable those resources to
tunities when effectively deployed (Brandenburger reach their potential through effective combina-
and Stuart, 1996; Collis, 1994; Peteraf and Barney, tion and use (Sirmon, Gove, and Hitt, 2008).
2003; Sirmon et al., 2007). While efforts to man- Lastly, we ask how processes that produce value-
age resources are important, greater value from creating resource bundles work together so that
individual bundles per se is not sufficient to create firms might optimize performance. Specifically,
a performance advantage. Managers must be able while effectively bundling and deploying resources
to integrate or link them across ‘chunks’ (Gavetti, is important, to create a performance advantage,
these processes must be synchronized.
1
We focus on managers as a potential creator of value for a Previously, scholars have experienced difficulty
firm. By value, we mean the difference between the benefit untangling the nature of resource-based relation-
firms generate from resources they control in relation to their
needs, where needs can be expressed in monetary terms as the ships, partly because of obstacles involved in
cost the firm incurs or is prepared to incur for the job, task, operationalizing key constructs (Priem and Butler,
product, or service rendered by a given resource or resource 2001). To overcome these obstacles, we focus the
bundle (Lepak et al., 2007). Expressed in this way, greater value
creation potential implies greater productivity from effective study on a single industry by utilizing data from
resource management (Barney, 1991; Peteraf, 1993). This view the National Football League (NFL) to investigate
is largely consistent with the type of value that Bowman and relationships between managerial ability, resource
Ambrosini (2000) label use value and is also consistent with an
efficiency-oriented approach to value creation in the resource- quality, resource value creation, and organiza-
based view (Peteraf and Barney, 2003). tional performance. This approach is appropriate
Copyright  2008 John Wiley & Sons, Ltd. Strat. Mgmt. J., 30: 457–485 (2009)
DOI: 10.1002/smj
Managerial Ability as a Source of Resource Value Creation 459
for testing our theory for several reasons. First, can be a source of managerial ability and per-
sports teams are comparable across such dimen- formance advantages, these relationships are com-
sions as size, structure, and goals (Allen, Panian, plex. Theory distinguishes between different types
and Lotz, 1979). They also share a common factor of ability in a manner reflecting the degree of trans-
market and general environment. Such common- ferability and relevancy of ability to different firm
alities ease comparisons between teams and are and industry contexts. These types include firm-
important, as resource-based theory is ultimately specific, industry-specific, and general components
about performance differences within industries (Becker, 1964; Castanias and Helfat, 1991). Gen-
(Peteraf and Barney, 2003; Mahoney, 1995). Addi- eral ability represents knowledge, skills, or expe-
tionally, while the quantity and individual task rience that produce value for any firm that makes
assignments (e.g., quarterback, running back, and use of them. It has the greatest mobility and is
so forth) of resources are similar across teams, less unique to a given context (Bailey and Helfat,
resource combinations vary, creating differences 2003; Baum, Locke, and Smith, 2001). In contrast,
in the output they produce. Consistency in mea- firm-specific ability is least mobile and unique to
surement and reporting for these teams allows us a context, while industry-specific ability is some-
to examine resource productivity and performance what transferable because of its relevance to firms
after isolating the effects of resource quality. This within the industry (Castanias and Helfat, 1991;
approach provides visibility to two of the most Sirmon et al., 2008). Because this study empha-
salient differences in sports teams: the abilities sizes the management of firm resources in a single
of their managers and the quality of resources industry, we focus on firm- and industry-specific
they control. Lastly, the extent to which sports sources of managerial ability that are most likely
teams conform to a common set of normative rules, to produce a strategic advantage.
procedures, and policies minimizes the influence From a strategic perspective, managerial ability
of institutional environments on performance out- derives from two main sources: domain expertise
comes, assuring consistency in the options avail- and resource expertise. Domain expertise refers to
able to rival organizations across time. Our choice managers’ understanding of the industry context
of this setting follows several researchers who have and the firm’s strategies, products, markets, task
used sports teams to test managerial (e.g., Bloom, environments, and routines (Boeker, 1989; Kor,
1999; Brown, 1982; Howard and Miller, 1993) and
2003; Spreitzer, McCall, and Mahoney, 1997). It
resource-based theories (e.g., Berman, Down, and
captures the breadth of knowledge managers accu-
Hill, 2002; Moliterno and Wiersema, 2007; Sirmon
mulate through formal education in a particular
et al., 2008).2
field and through ‘learning by doing.’ Although
managers bring explicit knowledge derived through
formal education into their firms, they build spe-
THEORY AND HYPOTHESES cific (tacit) knowledge about the firm and indus-
try domain through their experiences and rely on
Conceptualizing managerial ability this experience when making decisions about the
Research in multiple disciplines has produced appropriateness and sequence of actions (Collins
diverse theory regarding the origin of manage- et al., 2009; Fondas and Wiersema, 1997; Melone,
rial ability. We define managerial ability as the 1994). Further, as managers accumulate domain
knowledge, skills, and experience, which is often expertise, they develop proficiencies and become
tacit, residing with and utilized by managers (Hitt more effective at aligning firm strategies with the
et al., 2001; Kor, 2003).3 Although experience industry context in ways that enhance organiza-
tional performance, because they understand bet-
ter the opportunities to pursue and threats that
2
See Wolfe et al. (2005) for a thorough review of empirical require a response (Coff, 1999; Holcomb et al.,
studies that draw on data from professional sports teams to test
a wide range of research questions in management, organization 2009; Mahoney, 1995). Across different firm and
theory, and economics. industry domains, these skills differ. The more spe-
3
This view of managerial ability as consisting of knowledge, cific the ability embedded in managers, the more
skills, and experience embodied within an individual is largely
consistent with prior descriptions of human capital (Becker, likely it is to be imperfectly transferrable to other
1964; Schultz, 1961). firms and particularly difficult for rivals to imitate,
DOI: 10.1002/smj
making it a potent source of superior performance and increasing its strategic importance to a firm
(Hatch and Dyer, 2004). (Hitt et al., 2001; Liebeskind, 1996; Szulanski,
Resource expertise manifests through experi- 1996).
ence with resource management processes (Sirmon In support of this view, scholars link manage-
et al., 2007). Specifically, it represents the abil- rial ability directly to many performance outcomes.
ity of managers to select and configure a firm’s For example, in a study of the careers of 50
resource portfolio, bundle resources into distinc- Methodist ministers, Smith, Carson, and Alexander
tive combinations, and deploy them to exploit (1984) found that churches led by able man-
opportunities in specific contexts. Although it agers repeatedly experienced increased member-
seems reasonable to expect that managers only ship growth, greater charitable income, and higher
use their best resources, some conditions pre- property development levels. Similarly, using a
clude them from doing so. For instance, because sample of public U.S. firms, Hayes and Schae-
resources are not infinitely divisible, most firms fer (1999) found that managerial ability had a
are unable to simultaneously allocate physical positive effect on shareholder returns, while Hol-
assets, such as property and equipment, personnel, brook et al. (2000) attributed greater innovation
financial capital, and other resources, to pro- and firm growth to managers’ domain expertise
duce different goods or services without reduc- in a sample of U.S. semiconductor firms. Other
ing effectiveness. Such conditions make decisions work links managerial ability to new product
about resource use more challenging. For human development (e.g., Ahuja, 2000; Powell, Koput,
resources, constraints limiting effective use and Smith-Doerr, 1996; Subramaniam and Youndt,
increase as proficiencies across different skill sets 2005), internationalization (e.g., Carpenter and
and abilities embedded within individuals vary Fredrickson, 2001; Carpenter, Sanders, and
(Coff, 1997; Lado and Wilson, 1994; Wright and Gregersen, 2001; Hitt et al., 2006), competitive
Snell, 1998). Instead of maximizing an individ- behavior (e.g., Ferrier, 2001; Hambrick, Cho, and
ual’s skill set or ability, managers must consider Chen, 1996; Wiersema and Bantel, 1992), firm sur-
their marginal contribution, relying on knowledge vival (e.g., Gimeno et al., 1997), dissolution of
about employees’ skills and abilities to combine service-based firms (e.g., Pennings, Lee, and van
them in a way that enhances the value-creating Witteloostuijn, 1998), and outcomes such as prof-
potential of a bundle (Alchian and Demsetz, 1972). itability and growth (e.g., Carpenter et al., 2001;
Further, changes in the firm’s strategic priori- Geletkanycz and Hambrick, 1997; Hitt et al., 2001;
ties and business activities often necessitate trade- Miller and Shamsie, 1999).
offs between resource positions (Porter, 1996). Studies on sports teams also link managerial
Such trade-offs require managers to synchronize ability to performance. For instance, Sirmon and
resource management processes across different his colleagues (2008) found that able managers
bundles to achieve the necessary fit (Siggelkow, increase the likelihood of winning competitive
2001; Thomke and Kuemmerle, 2002). It is this contests and, more generally, affect outcomes of
knowledge about human resource constraints and those contests by making choices that optimize
resource management processes upon which man- resource use for a given competitive contest. Pfef-
agers rely as they utilize resources across different fer and Davis-Blake (1986) found that previously
settings (Helfat and Peteraf, 2003; Kor, 2003; Mel- successful managers had a positive effect on the
one, 1994; Mishina, Pollock, and Porac, 2004). percentage of games won during the regular season
Managerial ability develops through the expe- by teams in the National Basketball Association
riences managers gain over time (Borman et al., (NBA). Studying teams in Major League Baseball,
1993; Cannella and Holcomb, 2005; Kor, 2003; Cannella and Rowe (1995) linked previous man-
McCall, Lombardo, and Morrison, 1988). Specifi- agerial performance (a manager’s average winning
cally, as managers accumulate experience ‘on the percentage over five seasons) with the percentage
job,’ they try out and hone their knowledge and of games won during the season following succes-
skills (Dechant, 1990; Garland, 1985), enabling sion.
them to gain proficiency in tasks that they regularly By explicitly locating managerial ability in
perform (Hatch and Dyer, 2004; Holcomb et al., resource-based explanations of value creation,
2009). Knowledge accumulated in this way is often we explicate a joint role for managers and the
tacit, making it difficult for rivals to expropriate resources they manage in helping firms achieve
DOI: 10.1002/smj
success. Given that resources vary in the degree We have several reasons to believe that bet-
to which they can realize their value creation ter managerial ability allows firms to exploit the
potential unaided, and managers vary in their untapped value of resources. First, superior knowl-
ability to extract value, we explore how these edge of factor markets enable managers to be
two phenomena work together. We also seek to more effective than rivals at selecting valuable
extend resource-based theory by explaining how resources and negotiating their use on favorable
this interaction ultimately affects resource value terms (Makadok, 2001). Managers with more accu-
creation. rate expectations concerning their future value are
better able to exploit market imperfections for
developed or acquired resources (Amit and Schoe-
Resource productivity
maker, 1993; Denrell, Fang, and Winter, 2003;
Scholars working in the resource-based tradition Thomke and Kuemmerle, 2002). Second, man-
often ask what it is about resources that give them agers with better knowledge of the firm and indus-
inherent potential for value creation. Less research, try context are more likely to design strategies that
however, explores the extent to which firms exploit create value by being more effective than rivals
that potential. Nevertheless, most resource-based at bundling and deploying resources in new ways
scholars agree that what a firm does with its (Hansen et al., 2004; Lippman and Rumelt, 2003;
resources is as important as which resources it Miller, 2003). Moreover, when managers reinforce
possesses. The subtle, yet important, implication is and preserve this knowledge through experience,
that firms with superior managerial ability can real- they deepen their skill sets and improve their value
ize a performance advantage (Adner and Helfat, to the firm. Because managers differ in their abili-
2003; Castanias and Helfat, 1991; Hansen et al., ties, the value they extract from resource combina-
2004). Firm and industry contexts impose con- tions varies depending on managers’ understanding
straints; thus, many value-creating resource combi- of relevant contingencies, including contextual fac-
nations fail to occur because managers have neither tors that affect competitors’ resources as well as
the ability to recognize the opportunity nor the their own.
means to exploit it. This reasoning leads us to In professional football, head coaches utilize
expect differences among managers in their ability their understanding of human resource (player)
to create value from the resources their firms pos- and competitive contexts to influence the outcomes
sess. Illustrating this point, Penrose (1959) noted: of contests with rivals. Like their counterparts in
traditional business organizations, head coaches
The services yielded by resources are a func- face complexities and constraints that complicate
tion of the way in which they are used—exactly management of human resources. Because play-
the same resource when used for different ers with the needed skills and abilities are lim-
purposes or in different ways and in com- ited, managerial actions involving their use largely
bination with different types or amounts of determine the potential value resources create.
other resources provides a different service However, unlike top managers of most business
or set of services’ (Penrose, 1959: 25) organizations, head coaches make both strategic
and tactical decisions (Chandler, 1962) and are a
One important indicator of the potential value central figure in player selection and evaluation.
that managers create from their resources is the Additionally, in contrast to most business organi-
level of resource productivity, which refers to zations in which personnel perform a variety of
the net benefits achieved from resource manage- tasks as they progress through their career (Hatch
ment. Differences across firms are attributable to and Dyer, 2004), football teams reflect a more
resources having different levels of latent (i.e., specialized division of labor (Brown, 1982). Over
unrealized) efficiency and to firms using those football players’ careers and during the course of
resources in different ways. Defined in this way, each game, they play a distinctive offensive or
productivity increases when managerial actions defensive role, very seldom more than one, and
produce greater utility with the same inputs or pro- perform explicit tasks that depend on the role. For
duce the same utility with fewer inputs (Bowman instance, on offense, linemen block for running
and Ambrosini, 2000; Lepak et al., 2007; Peteraf backs and protect the quarterback on passing plays,
and Barney, 2003). but seldom accumulate yardage or score points;
DOI: 10.1002/smj
and quarterbacks produce yardage and score points an opponent’s offense. Finally, coaches substitute
passing, but seldom run the ball or block for oth- and rebundle players with specific skills and abil-
ers who do. Thus, resource management processes ities in response to actions by rivals. In doing so,
and their effects are critical in this setting. they attempt to produce bundles that best leverage
Broadly, head coaches perform two critical tasks players’ skills and abilities for a particular con-
involving management of team resources. First, text (e.g., a rushing play versus a passing play,
they bundle players into cospecialized combina- blitzing the opponent’s quarterback, etc.). Thus,
tions (Tripsas, 1997). Each player performs a role able managers who are more effective at bundling
determined by the task requirements of the bun- and deploying resources given a team’s strategic
dle. Proficiencies vary between players, increasing and competitive context can produce greater value.
the importance of managers’ knowledge about the Together, these arguments suggest that managerial
potential marginal contribution of players for given ability helps create value by enhancing resource
roles in each bundle. Second, coaches deploy these productivity through superior use, leading to the
bundles based on distinct task requirements for a following hypotheses:
given competitive context (e.g., offensive bundles
for running and passing, defensive bundles to pro- Hypothesis 1a: Managerial ability is positively
tect against the run and the pass). On a given play associated with the level of resource productivity
by the offense, only one or two players directly attained by a team’s offensive combination.
account for the yardage gained and points scored.
Throughout a season, most players seldom score Hypothesis 1b: Managerial ability is positively
points, and only a few produce yardage. These con- associated with the level of resource productivity
ditions dictate that managers bundle resources with attained by a team’s defensive combination.
specialized skills and abilities into unique offen-
sive or defensive combinations for specific con- However, the extent to which managerial abil-
texts. Success is more likely when managers create ity affects resource productivity depends on the
superior bundles and deploy them effectively. value-creating potential, or quality, of the indi-
Furthermore, resource management has an effi- vidual resources. Thus, the quality of resources
ciency component. Because output differs with included in each bundle may have a measureable
managerial actions that bundle and deploy effect on the value managers realize from different
resources in certain ways, effective actions can cre- resource combinations. Next, we explore the role
ate value when they maximize the net benefits a of resource quality in moderating the influence of
bundle produces (Peteraf and Barney, 2003). In managerial ability on resource value creation.
professional football, player salaries remain fixed
within a given season, holding overall payroll costs
Effects of managerial ability and resource
at a consistent level. To succeed, head coaches
quality on resource productivity
attempt to enhance the value of a team’s offen-
sive and defensive combinations in three ways. Some resources have more inherent value-creating
First, they acquire players with specific skills and potential than others. We define resource qual-
abilities at predetermined salaries to fill defined ity as the value-creating potential of a resource,
roles on the team (e.g., quarterback, running back, which contributes to the extent to which a firm
etc.). Limits on the total number of players and can develop and implement strategies that improve
the total payroll for teams in the league affect performance (Barney, 1991). Although prior the-
the managerial actions coaches take to structure ory and empirical evidence links resource quality
their resource portfolio. Second, coaches select the with measures of resource productivity (e.g., Amit
starting lineup, which represents the initial group and Schoemaker, 1993; Makadok, 2001; Youndt
of players bundled and deployed on offense and et al., 1996), our study departs from prior research
defense. When bundled together, players’ skills by considering the effect of managerial ability on
and abilities combine to determine the produc- productivity as a function of resource quality.
tive output of each combination. For example, Research examining resource-based theory has
the marginal contribution of players’ skills and not yet established compelling theory describing
abilities bundled and deployed on defense com- this interaction. Given prior work linking superior
bine to limit yardage gained and points scored by resources with resource productivity (e.g., Amit
DOI: 10.1002/smj
and Schoemaker, 1993; Makadok, 2001) and our from its all-Boeing fleet and efficient ticketing and
theory suggesting a similar relationship between check-in routines and personnel with ground per-
managerial ability and resource productivity, one sonnel and resources that specialize in quickly
might reasonably expect a positive interaction; preparing aircraft for departure. In doing so, South-
that is, higher levels of resource quality should west is able to offer low-cost ‘no-frills’ service
strengthen the influence of managerial ability on between midsized cities and smaller secondary
resource productivity. Certain factors, however, airports in major cities, such as Hobby Airport
suggest that this may not be the case. For instance, (Houston), Love Field (Dallas), and Midway Inter-
individual resources can produce lower marginal national Airport (Chicago).
contributions when they perform tasks outside their At the same time, we expect the positive rela-
specialization, such that managerial actions that tionship between managerial ability and resource
redeploy them may significantly improve their productivity to weaken at higher levels of resource
individual contribution and the level of resource quality. When resource quality is high, there may
productivity achieved (Alchian and Demsetz, be fewer opportunities for managers to add value
1972). Further, some resources may be a strate- by exploiting unidentified combinations. In this
gically poor fit with others, which may have case, how managers combine and use resources
an effect on resource value creation (Siggelkow, may be less important because most combinations
2001; Thomke and Kuemmerle, 2002). Under of high-quality resources will likely overwhelm the
these conditions, superior managerial ability can influence of managerial ability on value produced
be a source of insight into more effective com- by the combination (Leibenstein, 1978). Such
binations, enabling managers to create value by resources may remain valuable despite the pres-
using resources more effectively. In support of ence of lower managerial ability. Further, superior
this view, Morrow et al. (2007) found that valu- resources may actually provide fewer degrees of
able and difficult-to-implement actions that bun- freedom for managers to enhance productivity. In
dle and deploy existing resources in new ways this situation, it is plausible managerial decisions
could increase shareholder returns of firms in cri-
could disrupt task performance, reducing the value
sis. Specifically, these firms were able to create
derived from superior resources (Castanias and
new goods and services valued but not antici-
Helfat, 1991). Therefore, we propose that the pos-
pated by the market by recombining more effec-
itive relationship between managerial ability and
tively those resources that previously produced
resource productivity declines as resource quality
below-average returns. In turn, such actions led
increases. Formally:
to recovery. Further illustrating this argument, Sir-
mon et al. (2008) demonstrated that as the quality
of a firm’s resources decreases toward parity with
rivals, managerial ability has a greater bearing on Hypothesis 2a: Resource quality moderates the
advantages achieved in contests between profes- positive relationship between managerial ability
sional baseball teams. Thus, we reason that higher and the level of resource productivity attained by
managerial ability will have an especially impor- a team’s offensive combination; this relationship
tant influence on the productivity of resources with is weaker as resource quality increases.
less demonstrated potential for value creation.
As a practical example, Southwest Airlines Hypothesis 2b: Resource quality moderates the
Company utilizes an all-Boeing 737 fleet that car- positive relationship between managerial ability
ries fewer passengers and has a shorter maximum and the level of resource productivity attained by
flight range on average than most of the company’s a team’s defensive combination; this relation-
largest rivals (e.g., American Airlines, Delta Air- ship is weaker as resource quality increases.
lines, and United Airlines). Nevertheless, South-
west’s operating cost per seat mile is among the
lowest in the industry and its profitability is among Synchronizing management processes to create
the highest. One way it accomplishes this feat is by a resource-based performance advantage
bundling and deploying flight operations resources
in a way that increases their value-creating poten- Although we argue that managerial ability affects
tial. Specifically, Southwest bundles short-haul jets productive output, greater productivity from
DOI: 10.1002/smj
specific bundles is not sufficient to create a per- Central to our argument is our view that the
formance advantage.4 While managing resource influence of managerial ability on resource-based
bundles to increase their productivity is important, performance advantage reflects differences not
managers must synchronize management processes only in the ability of managers to manage
within and between the firm’s bundles (Sirmon resources, but also in their ability to synchronize
et al., 2007). Synchronization involves the inte- resource management processes across distinct
gration and balancing of interdependent bundles business activities by trading off one resource posi-
to ensure that activities reinforce and align with tion with another (Black and Boal, 1994; Galunic
the firm’s strategic and competitive context and Rodan, 1998; Helfat and Peteraf, 2003). Doing
(Siggelkow, 2001). A firm with many resource so is especially difficult when related business
combinations that reinforce each other has a high activities are incompatible (Gavetti, 2005; Porter,
degree of synchronization. Because of synchro- 1996; Postrel, 2002) or when external conditions
nization, colocated and interdependent bundles are constrain managerial choice (Holcomb and Hitt,
more difficult for rivals to imitate and thus more 2007; Peteraf and Reed, 2007). Further, changes
valuable toward achieving a performance advan- to a firm’s underlying activity system often require
tage than is the sum of individual resources or managers to make trade-offs in the way in which
disjoint combinations (Porter, 1996; Thomke and different bundles are linked. Returning to the prior
Kuemmerle, 2002). Adjusting these combinations example, Southwest Airlines produces value with
and using them in such a way as to match them an efficiency-oriented approach through its flight
with the firm’s strategic and competitive context is operations ‘bundle’ by operating efficient aircraft,
an important responsibility of managers (Amit and keeping service add-ons to a minimum, and main-
Schoemaker, 1993; Black and Boal, 1994; Teece, taining short turnaround times at the gate. How-
2007). ever, Southwest creates a sustainable advantage
Building on extant literature, we argue that not simply by optimizing its flight operations,
resource synchronization figures importantly in the but by synchronizing flight operations with other
effects of managers on performance. In previous resource combinations (e.g., flight and crew man-
research examining the relationship between management, customer service, aircraft maintenance,
agers and performance, scholars frequently exam- marketing, and so forth) to produce greater utility
ine managers’ influence on proximal actions or for customers (Black and Boal, 1994; Porter, 1996;
behaviors thought to influence those outcomes Sirmon et al., 2007). Such linkages produce inter-
(e.g., Carpenter and Fredrickson, 2001; Eisen- dependencies requiring greater managerial coordi-
mann, 2002; Hambrick et al., 1996; Hayward and nation and coupling, making them more difficult
Hambrick, 1997; Miller and Shamsie, 2001; Smith for rivals to imitate (Lippman and Rumelt, 1982;
et al., 1991). Indeed, researchers have put for- Rivkin, 2000).
ward a variety of mechanisms by which managers Raff’s (2000) examination of the interdepen-
affect performance, such as managing stakehold- dencies between distinctive combinations in U.S.
ers (e.g., Donaldson and Preston, 1995), providing book retailing demonstrates the extent to which
strategic direction (e.g., Papadakis and Barwise, synchronization produces an advantage. Borders
2002), leading with symbolic actions (e.g., Pfeffer, leverages a category management capability that
1981), and manipulating dependencies (e.g., Car- makes a wider assortment of books available in
roll, 1993). Mediating influences, though clearly
each store and a replenishment capability that uti-
present, are rarely developed or empirically tested.
lizes category profiles and actual sales informa-
We extend resource-based arguments in an effort
tion to better manage inventory levels at each
to better understand managerial actions that may
store. These capabilities make Borders’ sophisti-
intervene in this relationship.
cated information technology capability that tracks
inventory and produces sales forecasts more valu-
4
In this work, we apply a nuanced view of performance advan- able. Together, these combinations reinforce each
tage to describe the performance of a firm relative to the average other to produce distinct performance advantages
(mean) performance for all rivals in a given segment. Specifi- for Borders. Specifically, the firm’s information
cally, using data from sports teams, we measure performance
as the percentage of the games a team wins during the regular technology capability enables the replenishment
season. capability, which increases the benefits created
DOI: 10.1002/smj
by the category management capability. Simi- the same or comparable resources and face sim-
larly, in a manufacturing setting, Milgrom and ilar competitive conditions, the value that man-
Roberts (1990) found resource combinations that agers create from those resources varies depend-
produced wider product assortment and flexible ing on how they combine and use their resources.
manufacturing reinforced one another: the wider Although resource productivity per se is not suffi-
the assortment, the more valuable is flexible cient to ensure performance benefits, we maintain
manufacturing; conversely, the more flexible the that it is an important first step.
manufacturing system, the greater the value real- Second, managerial ability figures importantly
ized from increased product assortments. Addi- in decisions to synchronize processes within and
tional empirical and field research examining the between value-creating resource bundles (Sirmon
airline industry (e.g., Peteraf and Reed, 2007), et al., 2007). In professional football, maximizing
the petroleum industry (e.g., Helfat, 1997), finan- productivity with one bundle might be offset by
cial services (e.g., Chung, Singh, and Lee, 2000; reductions in the productivity of the other, because
Siggelkow, 2001), the typesetter industry (e.g., constraints on players and payroll create zero-sum
Tripsas, 1997), and pharmaceuticals (e.g., Thomke resource allocation across the bundles. Therefore,
and Kuemmerle, 2002) provide further evidence team performance outcomes depend not only on
for the benefits of synchronization. the level of productivity achieved by the team’s
Not all resource combinations need to be syn- offensive or defensive combination, but also on
chronized with each other. If the contribution of a coach’s ability to synchronize processes involv-
one combination to a performance advantage does ing the structuring, bundling, and deploying of
not rely on the presence of another, the com- resources within and between these two combina-
binations are independent (Thomke and Kuem- tions. Such synchronization involves both strategic
merle, 2002). In contrast, two or more combi- and tactical decisions. For example, teams with
nations are interdependent if they interact with highly productive defenses may pursue less risky,
and/or reinforce each other. Combinations rein- ball control-oriented offensive resource combina-
force each other when the contribution of one to tions that enable the team to control the ball for
a firm’s performance increases in the presence of a greater percentage of each contest. Doing so
another (Black and Boal, 1994); that is, the degree requires that coaches define task requirements and
of synchronization between combinations is evi- manage the team’s resource portfolio in such a way
denced by the extent to which they complement as to ensure efficiency goals are met. By influenc-
each other (Milgrom and Roberts, 1990). This con- ing the length and pace of a game, coaches can
ceptualization closely parallels Black and Boal’s limit opponents’ ability to produce points. Thus,
(1994) cogency relationships and is consistent with decisions across bundles are complex and interde-
the concept of asset orchestration (Teece, 2007), pendent, and managerial ability may be an impor-
strategic fit (e.g., Porter, 1996; Siggelkow, 2001), tant source of superior synchronization. While
equifinality in open systems theory (e.g., Doty, managerial actions that combine and use resources
Glick, and Huber, 1993), and resource configura- are important (Peteraf and Bergen, 2003; Sirmon
tion (e.g., Miller, 1986). et al., 2007), creating a performance advantage
We reason that managerial ability figures impor- depends significantly on synchronization efforts
tantly in decisions that affect the synchronization that balance interdependencies among resource
of interdependent resource combinations. Com- bundles within the strategic and competitive con-
bined with earlier arguments, we suggest that text. Accordingly, we predict the following:
differences in the level of synchronization that
managers derive can account for differences in Hypothesis 3: Managerial ability has a pos-
performance among rivals. The foundation for itive influence on organizational performance
this hypothesized relationship is as follows. First, through its mediating effect on resource synchro-
as noted, managerial ability determines, in part, nization.
the extent to which managerial decisions create
value by using resources in ways that alter effi- Further, following previous arguments, we
ciency levels (Adner and Helfat, 2003; Casta- expect this relationship becomes increasingly
nias and Helfat, 2001; Kor, 2003). Because man- important with less valuable resource portfolios.
agers’ ability differs among firms that control In response, we extend our prior hypothesis to
DOI: 10.1002/smj
suggest that the effect of managers’ ability to syn- Dependent and intervening variables
chronize interdependent resource combinations on
Organizational performance
organizational performance depends significantly
on a firm’s resource context. Specifically, we In measuring performance, we operationalized
expect the positive mediation between managerial organizational performance as team winning per-
ability and resource synchronization to weaken at centage within each season. Specifically, we used
higher levels of resource quality. Thus, we predict: the ratio of games won to total games played dur-
ing the regular season. This particular measure has
Hypothesis 4: Resource quality moderates the several methodological advantages over alternative
positive relationship between managerial abil- measures of performance. First, the measure has
ity and organizational performance through re- a mean value of 0.500 (or 50%) for all teams
source synchronization; this relationship is in a given year and is easily comparable across
weaker as resource quality increases. teams and periods. Further, a team’s winning per-
centage determines whether it will secure a spot
in the playoffs and have the opportunity to win
METHODS a league championship. Team winning percentage
is not only a visible and intuitive metric of per-
Sample formance in this context, but is consistent with
Professional football is a highly competitive sport absolute measures of organizational performance
wherein teams consist of the same number of play- in prior studies using sports teams (Berman et al.,
ers, and head coaches combine and utilize these 2002; Moliterno and Wiersema, 2007; Wolfe et al.,
players to perform similar interdependent tasks. 2005).5 Although an empirically interesting aspect
Football head coaches generally have the primary of examining the performance of sports teams in
responsibility for actions involving the manage- this way is that competitive contests represent a
ment of a team’s players, performing duties similar zero-sum game in which one team’s win is another
to chief executive officers in traditional business team’s loss (Jenkins, Pasternak, and West, 2005),
organizations. Specifically, our sample consists of the percentage of games a team wins is best under-
data for sports teams that competed in the NFL stood as an absolute measure of performance, in
from the 1980 season through the 2000 season. which the mean value for all teams in a given sea-
Archival data on coaches, players, and team per- son is embedded within the measure of a team’s
formance are available for multiple years. These winning percentage in each season.
characteristics allow consistent measurement of
constructs and comparison across organizations, Resource productivity
making professional football teams an appropri-
We assessed the productive output of resource
ate context for empirical tests of resource-based
bundles using measures of resource productivity
theory.
for the two primary resource combinations used
We compiled data on the performance of each
in professional football: offense and defense. For
NFL team, individual player demographic and per-
each combination, we specified resource produc-
formance data, and biographical data for head
tivity as the net productive output per dollar spent
coaches from Total Football II: The Official Ency-
on player salaries. This measure indicates the
clopedia of the National Football League (Carroll
extent to which the resources within each bundle
et al., 1999) and from The Pro Football Encyclope-
are efficiently producing output.
dia: The Complete and Definitive Record of Profes-
First, we used multiple indicators to assess
sional Football (Maher and Gill, 1997). We sup-
fully the net productive resource output for each
plemented these sources with data obtained from
the NFL, The Pro Football Hall of Fame, and
5
major newspapers. Twenty-eight teams competed In supplementary analyses, we also used the total number
of wins for each team during each season as the measure of
between 1980 and 1993. Prior to the 1994 season, organizational performance. For each team-year observation in
the NFL added two teams to increase the num- the dataset, we summed the total number of wins by the team
ber to thirty. Therefore, our sample contains 602 during the regular season and the post-season, added one, and
took the natural logarithm of this number. Using this measure
individual team-year observations across the years of organizational performance did not substantively change our
(seasons) included in our study. results.
DOI: 10.1002/smj
team’s offensive resource combination and defen- Previously, free agency and league-wide salaries
sive resource combination (Boyd, Gove, and Hitt, followed rules that allowed the NFL to compensate
2005). For each indicator, team data was col- teams for the loss of free agents (Quirk and Fort,
lected for each game played during the regu- 1997). During this period, player salaries were sub-
lar season. We constructed team-level indices for ject to market forces that set pay and contract terms
rushing yards gained, passing yards gained, rush- based on a range of different individual- and team-
ing yards allowed, passing yards allowed, points level factors. Under both approaches, players nego-
scored from offensive touchdowns, and points tiate the financial and contractual terms of their
allowed from touchdowns scored by an opponent’s employment directly with teams. In turn, teams
offense.6 Additionally, we standardized scores for determine salaries for individual players that reflect
each team-level indicator. Second, we produced overall payroll conditions for the team and the need
a team-level measure of net productive output for specialized skills and abilities to accommodate
for the offensive and defensive resource com- specific roles/tasks in each bundle.
binations. Specifically, for the team’s offensive For each player, we summed base salary earned,
resource combination, we summed the standard- incentive bonus payments received (e.g., for indi-
ized scores for total rushing yards gained, total vidual performance), and an annual allocation of
passing yards gained, and total points scored by the any signing bonus the player received at the begin-
offense for games played during the regular season. ning of a contract. We applied a minimum-use
The net productive output for a team’s defensive criterion for determination of the players to include
resource combination consisted of the total yards when calculating the dollars spent for players’
(rushing and passing) and total points (rushing and salaries attributed to each resource combination.
passing) allowed during the same period. Team The requirement for inclusion of a player’s salary
management and players, the NFL, and journalists in total payroll computations for either combina-
who follow professional sports teams commonly tion was three-fold: the player was eligible for
utilize these measures to gauge the relative perfor- participation in a team’s regular season games,
mance of teams’ offensive and defensive units. the player had a designated task assignment on
Next, we determined the total payroll dollars the offense (defense), and the player participated
spent on players’ salaries for each resource com- in one or more plays for the combination in at
bination during the season. While the total number least one game during the season. This criterion
of players on each NFL team and the number that excluded salaries for players with specialized roles
participate on a given play have remained stable outside the offense and defense (e.g., placekicker,
across seasons, logic governing human resource punter), members of a team’s practice squad,7
mobility and total league-wide payroll costs has and players considered ineligible for competition
evolved. The Collective Bargaining Agreement by the league (e.g., physically-unable-to-perform,
(CBA) of 1993 between the players’ union and under suspension for violation of league policies).
franchise owners in the NFL ushered in the era As a final step, we calculated the ratio of net pro-
of ‘free agency’ while instituting a salary cap that ductive resource output to payroll dollars apply-
limited the percentage of total revenue that any one ing the minimum use criteria for each combina-
team could pay to players (Leeds and von Allmen, tion. Specifically, for a team’s offensive (defen-
2002). Beginning with the 1994 season, the CBA sive) combination, we calculated the ratio of the
specified a ‘hard’ cap that no team can exceed and net productive output for the offense (defense) to
a ‘hard’ floor that reflects the minimum payroll payroll dollars for players assigned to the offen-
level above which each team must spend. Under sive (defensive) bundle to derive our measure of
terms of the CBA, the NFL adjusts the cap and the resource productivity.
floor annually based on the league’s total revenues. Importantly, our approach overcomes limitations
with previous measures of productivity noted by
6
other scholars (e.g., Datta, Guthrie, and Wright,
In professional football, a touchdown is worth six points to
the scoring team. While the offense is primarily responsible for
7
teams’ touchdown production, teams can also produce touch- In accordance with the terms of the 1993 CBA, NFL teams
downs by returning a kickoff or punt for a touchdown or by a are allowed to employ players that practice with the team and
defense producing a turnover. In our measure of net productive receive compensation and benefits, but did not appear on the
output for the offense, we only included the points for which a team’s active roster. By rule, practice squads may not exceed
team’s offensive resource combination was directly responsible. five (5) players per team.
DOI: 10.1002/smj
2005; Koch and McGrath, 1996). First, by con- for determination of the players to include when
sidering payroll dollars, this measure incorporates calculating the dollars spent for players’ salaries
potential differences in resource costs that may attributed to each resource combination was that
accompany increased productive output for differ- the player was eligible for participation in a team’s
ent resource combinations. Thus, consistent with regular season games and had a designated task
our conceptualization, resource combinations are assignment (role) on offense or defense. Lastly,
more productive if they generate greater output we calculated the ratio of net productive resource
with a given level of inputs or generate the same output to the total payroll dollars spent on player
level of output with fewer inputs. Second, each salaries that met our minimum-use criteria. This
resource combination can directly influence key step reflects our conceptualization of resource syn-
elements of productive resource output (e.g., yards chronization as net outputs of the two resource
gained, points scored, yards allowed, and points combinations relative to the net costs incurred for
allowed). them.
Resource synchronization Independent and moderating variables

As noted in the development of our hypotheses, Managerial ability
resource synchronization represents the extent to We used two different measures of managerial
which managerial bundling and deployment pro- ability in this study. First, we calculated the
cesses reinforce and align a firm with its strate- weighted career winning percentage for each man-
gic and competitive context. Given limits in the ager for each team-year observation to assess the
total number of players and total payroll consid- extent to which a manager is consistently suc-
erations, decisions involving salaries for players cessful or unsuccessful over time using Dirks’s
with specialized roles attributed to one resource (2000) formula for managerial ability: Career win-
combination (i.e., the offense) can limit decision ning percentage × (1 − (1/total number of years as
options available to managers for players with spe- a head coach)). We computed this measure at the
cialized roles on the other (i.e., the defense). As a end of the previous season. The first part of the
result, head coaches face trade-offs, requiring them equation calculates a career winning percentage,
to synchronize the two combinations during a sea- which represents the proportion of regular season
son. games a manager’s teams have won to the total
In tests for mediation, we operationalized re- number of games played over his or her career as a
source synchronization as the ratio of net combined head coach. We then adjust this measure to account
productive resource output for the team to the for the manager’s total number of years as a head
total payroll dollars spent on all player salaries coach. This particular measure recognizes that a
with specialized offensive or defensive roles on high winning percentage accumulated over a large
the team. In a broad sense, this construct measures number of seasons may provide a stronger indi-
the degree to which managerial actions effectively cation of managerial ability than a high winning
integrate and balance the two combinations given percentage accumulated over fewer seasons.
constraints in the number and total cost of human Additionally, we formed a composite measure
resources to the team. We first reversed the sign of of managerial ability by analyzing dimensions that
the resource combination score for the defensive proxy the accumulation of managerial knowledge
combination. We then summed the standardized and skills. We gathered data for each manager
net productive output scores during the regular (head coach) for each year beginning with the
season for the offensive combination and defensive 1980–1981 season through the 2000–2001 sea-
combination, respectively. Larger positive scores son for the following items: total number of sea-
are associated with higher levels of net productive sons (years) as a head coach, total number of
output. regular season games coached as a head coach,
Next, we calculated the total payroll dollars total number of regular season wins as a head
spent on players’ salaries with specialized roles on coach, total number of coach of the year awards
the team’s offense and defense during the season, as a head coach, total number of division titles
using the same salary components described pre- as a head coach, total number of league cham-
viously. In this case, our minimum-use criterion pionships as a head coach, and total number of
DOI: 10.1002/smj
players named all-pro (see below for a description in the status of MVPs, all-pro players, and all-
of this term) as a head coach. We evaluated the conference players based on the number of players
appropriateness of these dimensions by address- who receive such honors annually. Fewer play-
ing two questions: ‘how well do the items load ers reach MVP status than reach all-pro or all-
on a single factor?’ and ‘how internally consis- conference status, and fewer reach all-pro status
tent are the items?’ We assessed the first criterion than all-conference status. Thus, MVP is the high-
with a principal components factor analysis, as this est status honor, followed by all-pro, followed by
technique extracts variance from a larger set of all-conference. To avoid double-counting players
indicators to create a single measure (Pedhazur within each status, we included players selected
and Schmelkin, 1991). All eight items had abso- in more than one category in the category rep-
lute factor loadings exceeding 0.40 (Tabachnick resenting the highest status category. Finally, we
and Fidell, 2001). Following the Kaiser criterion weighted scores for each category to reflect dif-
and the scree plot, we extracted one factor with ferences in status. Specifically, we multiplied the
an eigenvalue greater than one. The resulting fac- standardized scores for each status category by its
tor demonstrated internal consistency (α = 0.741) inverse ratio using values of 1.0, 0.66, and 0.33 for
and explained 81.2 percent of the total item vari- MVP, all-pro, and all-conference levels, respec-
ance. We constructed a scale for managerial ability tively.8
by summing the standardized values of each item
making up the scale.
Control Variables
Resource quality We selected several variables to control for con-
ditions that could legitimately account for vari-
Among sports teams, resource quality is an impor-
ance in organizational performance during a sea-
tant predictor of performance (Cannella and Rowe,
son. Competitive rivalry can limit or directly influ-
1995; Dirks, 2000; Sirmon et al., 2008). The NFL
ence performance outcomes by affecting the inten-
has a well-established procedure for identifying
sity of competition (Chen, Su, and Tsai, 2007;
the highest quality players each year. At the end
Ferrier, 2001; Ramaswamy, 2001; Young, Smith,
of each season, coaches and players, together
and Grimm, 1996). In this study, we consider the
with journalists from major metropolitan newspa-
level of equality across teams within each division,
pers, select a league-wide offensive most valuable
player (MVP) and defensive MVP, an all-pro team because these organizations are direct competitors.
representing the best player at each position from Specifically, we measure the competitive rivalry
across the league, and an all-conference team rep- in each division for each season by calculating the
resenting the best player at each position from each standard deviation of the number of games won
of the league’s two conferences. across teams within a division (Canella and Rowe,
For each year in the study, we determined 1995). Higher (lower) values indicate more (less)
the number of MVPs and representatives (if any) inequality and lower (higher) competitive rivalry.
named to all-pro and all-conference teams by the League-wide player strikes in the NFL occurred
NFL at the conclusion of the previous year. Using in 1982 and 1987, disrupting organizational activi-
a team’s roster of players at the beginning of ties for a portion of both seasons. We coded strike
the current season, we computed resource qual- year flag as a dummy variable (0/1), with one indi-
ity measures that represent the quality of indicating the year in which the NFL experienced a
vidual resources assigned to a team’s offensive league-wide strike.
resource combination and defensive resource com-
bination, respectively. Specifically, we divided the 8
MVPs are superior in status to all-pro selections. All-pro
number of MVPs, all-pro, and all-conference play- selections are superior in status to all-conference selections.
ers on each team by the total number of players For example, assume the selection of two MVPs, 24 players
on the all-pro team, and 48 players on the all-conference team
named to each status (e.g., league MVP, all-pro, in a given year. If a particular organization had one player
all-conference) to account for variation from year elected as an MVP, and had four players elected to the all-
to year in the total number of players selected pro team and six players to the all-conference team,
its resource

(see Dirks [2000] for further discussion of this quality score would be computed as follows: 1.0 × 1 2 +

0.66 × 4 − 1 + 0.33 × 6 − 4 = 0.54.
procedure). This procedure recognizes differences 24 48
DOI: 10.1002/smj
The NFL instituted the league-wide salary cap year for each player. We then calculated an average
in 1994 following the terms of the 1993 CBA. for each team-year observation.
Although this cap places a limit on the maximum To test our mediation hypotheses using orga-
cumulative salary that each team can pay in player nizational performance as the dependent variable,
salaries, teams maintain discretion over total pay- we included previous organizational performance
roll dollars based on salaries and incentive bonuses to control for regression to the mean. Regres-
they award to each player. We coded the salary cap sion to the mean can be a confounding factor in
flag as a dummy variable (0/1), with one indicat- research examining variation in performance over
ing those seasons in which the NFL operated under time (Allison, 1990; Edwards, 1994). Thus, we
the salary cap. computed the winning percentage of the team in
League-wide expansions took place prior to the the regular season as the ratio of the total number
1995 and 1999 seasons when the NFL added new of games won to total games played in the regu-
teams to the league. Such expansions influence lar season for the three years immediately prior to
resource availability because the total number of the current season. The three-year lagged average
players increases when new teams join the league. minimizes the effect of anomalies (both high and
Therefore, we coded league reorganization flag as low) on performance during the season (Sirmon
a dummy variable (0/1) to indicate the year in et al, 2008).
which league reorganization occurred, with one Finally, we included year indicators (dummy
indicating the year in which the NFL completed variables) for each year in the sample to account
a reorganization. for potential period effects for all models (Bergh,
Previous research links manager succession with 1995; Greene, 2003), and to control for contem-
organizational performance (Allen et al., 1979; poraneous correlation in our design (Certo and
Cannella and Rowe, 1995). Therefore, we included Semadeni, 2006).
a manager succession flag dummy variable (0/1),
with one indicating that a succession occurred
Model specification and estimation
between the prior and current seasons. This flag
identifies succession events that occurred between We employed cross-sectional time series regres-
seasons. sions to analyze our hypotheses. Our observation
Each year, during the off-season, the NFL holds unit in the models is a team-year. Because we
a draft wherein teams select players, usually from organized observations for teams into a pooled
college teams. Team winning percentages from the cross-sectional time series dataset, there is poten-
previous year generally determine the selection tial for both nonindependence and cross-sectional
order; teams with lower percentages pick earlier. heteroskedasticity. Thus, ordinary least squares
This process gives weaker teams an opportunity to regression could produce correlated error terms,
select higher quality resources. Therefore, we con- understated standard errors, and inflated t-statistics.
trol for average draft position of each organization Scholars commonly use fixed- or random-effects
during the draft that precedes the current season. models to mitigate this problem (Certo and
Because the difference between two adjacent draft Semadeni, 2006). The choice between fixed- and
positions early in a draft can represent a more sig- random-effects models depends on underlying sta-
nificant difference in the potential quality of the tistical assumptions. In contrast to fixed-effects
players than does the same difference in adjacent models, which use only within-unit information
positions later in the draft (Berman et al., 2002), to calculate estimates, random-effects models use
we took the natural logarithm of the draft positions both between- and within-unit information to cal-
before calculating the draft position total for each culate estimates (Wooldridge, 2002). In other
team. We then summed the draft positions for each words, random-effects models assume the panel-
team and divided by the number of players drafted level disturbance changes over time. Compared
by the team. with fixed-effects estimators, which remain stable
In our empirical context, players’ ages may over time for each unit (e.g., firm), random-effects
affect the quality of a team’s human resources. We estimators allow the unit effect to vary over time.
control for the average age of the players in the We used the Hausman (1978) specification test
current season by calculating the difference in the to evaluate the use of random-effect estimators. For
year a season was completed and a player’s birth our models, the Hausman tests yielded statistically
DOI: 10.1002/smj
nonsignificant results, suggesting the independent variable must be significantly associated with the
variables were uncorrelated with the fixed effects. dependent variable when the mediator is not in
As a result, we used random-effects time series the model, and the mediator must be significantly
regressions with robust estimators that provide associated with the dependent variable when the
controls for autocorrelation (Bergh, 1995). The independent variable is not in the model. In partial
random-effects model is given by the following mediation, the independent variable remains sig-
equation: nificantly associated with the dependent variable
when the mediator is included in the model. In
yit = β0 + β1 xit1 + β2 xit2 + · · · + βk xitk + αi + uit full mediation, the independent variable becomes
nonsignificant when the mediator is added.
where yit is the dependent variable, βk is the vector We also tested for mediation using the product
of coefficients, xit is the vector of predictors, αi of coefficients in a path model to derive the stan-
represents the random effects, and uit is the error dard error of the indirect (mediated) effect (Sobel,
term. For each t, 1982). Using the matrix formulae derived by Sobel
(1982), we apply the product of coefficients strat-
E (uit |Xi , αi ) = 0 and E (uit |Xi ) = β0 egy to obtain point estimates and first-order stan-
dard errors for the indirect effect ‘path’ in an
Using Stata (ver. 9) and setting the team as the
equation simultaneously modeling the paths cre-
cross-sectional variable, we estimated our models
ated by the direct effect of X (predictor) on Y
with the xtreg function. We included the re (ran-
(outcome), as well as the indirect effect of X on Y
dom effects) option (xtreg depvar [indepvars] if
through M (mediator); these standard errors permit
[, re RE options] in Stata) and estimated conser-
significance testing using critical ratios for measur-
vative robust standard errors for all model coef-
ficients (Wooldridge, 2002). This procedure esti- ing specific indirect effects (i.e., the path coeffi-
mates cross-sectional time series regression models cient of each individual mediation path). Specif-
using estimators that produce a matrix-weighted ically, we examined the indirect effect of man-
average of the between and within results. Further, agerial ability and the managerial ability/resource
our findings were robust to use of cross-sectional quality interaction on performance via resource
time series regression with fixed-effects estimators synchronization. This approach uses the critical
to correct for heteroskedasticity and generalized ratio to test for significance, as follows:
least square (GLS) estimators with controls for
autocorrelation (xtregar in Stata). Results were
substantially similar; using both approaches, all z = ab a 2 σb2 + b2 σa2 + σa2 σb2
signs were the same, and the levels of significance
were similar. Applying this alternative analysis
(i.e., fixed-effects analysis) to panel data can pro- where a is the coefficient corresponding to the
duce inconsistent standard errors when the number effect of independent variable on the mediator;
of panels exceeds the number of observations per b is the coefficient corresponding to the effect of
panel (Hsiao, 2002). Certo and Semadeni (2006) the mediator on the dependent variable partialling
describe this problem and potential remedies. As out the effect of the independent variable; ab, the
we noted, following their recommendations for product of the a and b paths, represents the indirect
panel datasets with relatively fewer periods, we effect of the independent variable on the dependent
include time dummy variables to control for con- variable through the mediator; and σa2 and σb2
temporaneous correlation in our design resulting in are the variances of the coefficients for paths a
reasonably stable standard errors across models. and b, respectively.9 We compare this ratio to a
standard normal distribution to establish statistical
Test for mediation significance (Preacher and Hayes, 2004).
We test for mediation using two approaches. First,
we employ the traditional approach suggested by
James and Brett (1984; see also Baron and Kenny, 9
The square roots of σa2 and σb2 are the standard errors of the
1986). Following this approach, the independent estimates.
DOI: 10.1002/smj
RESULTS significantly predicts the level of resource pro-

ductivity for team offenses using both measures
Table 1 presents descriptive statistics and inter- of managerial ability (using weighted career win-
correlations for all variables except for the year ning percentage: b = −2.480; p < 0.01; using the
indicators (summary statistics for these dummy composite measurement scale: b = −0.073; p <
0.001). This result indicates that the effect of man-
variables are available from the authors). Mea-
agerial ability is weaker at higher levels of human
sures of resource productivity, managerial ability,
resource quality for the offense. For the defense,
resource quality, and synchronization show signif-
the managerial ability/resource quality interaction
icant positive correlations with organizational per-
term is negative and significantly predicts the
formance during the current period. The univariate
level of resource productivity using the com-
and multivariate normality scores for all variables
posite measurement scale for managerial ability
were examined and found to be within acceptable
(b = −0.195; p < 0.05), but yielded statistically
levels. Furthermore, to evaluate multivariate multi-
nonsignificant results using the weighted career
colinearity, we calculated variance inflation factors
winning percentage. We plotted the relationship
(VIF) for the variables used in each regression
between managerial ability (using the composite
model (not shown). All VIF scores were less than measurement scale) and levels of resource produc-
two, meeting neither the critical value of 10 sug- tivity for the offense and defense at the mean-level
gested by Neter, Wasserman, and Kutner (1989) of resource quality and at plus- and minus-one
nor the more stringent value of two suggested by standard deviation from the mean for the offen-
Cohen et al. (2003). Thus, multicolinearilty does sive resource combination and for the defensive
not appear to influence our results. resource combination (see Figures 1 and 2, respec-
Tables 2 and 3 report the results of the tests of tively; Aiken and West, 1991). Results suggest that
our first two hypotheses. Table 2 contains results the mitigating influence of resource quality on the
using weighted career winning percentage as the managerial ability-resource productivity relation-
measure of managerial ability. Table 3 presents ship differs between the bundles.
results from regression models that test the same Because we characterized a team’s resource con-
relationships using our composite measure of man- texts as having a moderating effect on the rela-
agerial ability. Hypothesis 1 predicted that man- tionship between managerial ability and resource
agerial ability would have a positive effect on value creation, we conducted additional analy-
the level of resource productivity attained by a ses to ascertain the significance of the interaction
team’s offensive combination (Hypothesis 1a) and between managerial ability and resource quality
defensive combination (Hypothesis 1b). Results attributed to a team’s offensive and defensive com-
indicate that the relationship between manage- binations. To do this, we created a measure of high
rial ability and resource productivity for offensive resource quality when resource quality is greater
and defensive combinations is positive and signifi- than the mean and zero otherwise, and a measure
cant (using head coaches’ weighted career winning of low resource quality when resource quality fell
percentage: b = 2.172; p < 0.001 and b = 1.085; below the mean. We created measures of high man-
p < 0.01; using the composite measurement scale: agerial ability and low managerial ability following
b = 0.073; p < 0.001 and b = 0.048; p < 0.01). the same approach. Next, we produced four inter-
Thus, we find support for Hypothesis 1. action terms: high managerial ability/high resource
With Hypothesis 2, we predicted the positive quality, high managerial ability/low resource qual-
effect of managerial ability on the level of resource ity, low managerial ability/high resource quality,
productivity attained by a team’s offensive combi- and low managerial ability/low resource quality.
nation (Hypothesis 2a) and defensive combination Finally, we tested these interactions using random-
(Hypothesis 2b) would be weaker as the quality of effects regression with robust estimators to provide
resources bundled in each combination increased. controls for autocorrelation.
Results in Table 2 (Model 3) and Table 3 (Model At low resource quality, results indicate that
3) provide reasonable support for this hypoth- both high and low levels of managerial abil-
esis using both measures of managerial ability. ity (using head coaches’ weighted career win-
Specifically, the coefficient for the managerial abil- ning percentage) are negatively and significantly
ity/resource quality interaction term is negative and related to resource productivity for the offensive
DOI: 10.1002/smj
Table 1. Descriptive statistics and correlationsa,b
Mean s.d. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1. Organizational performance 0.500 0.187
2. Resource synchronization −0.025 0.160 0.634∗∗∗
3. Resource productivity 0.227 1.878 0.521∗∗∗ 0.388∗∗∗
(offense)
4. Resource productivity −0.245 1.829 0.425∗∗∗ 0.481∗∗∗ −0.357∗∗∗
(defense)
5. Managerial ability 0.059 2.648 0.260∗∗∗ 0.139∗∗∗ 0.103∗∗
(composite measure)
6. Managerial ability 0.373 0.186 0.344∗∗∗ 0.317∗∗∗ 0.246∗∗∗ 0.126∗∗ 0.718∗∗∗
(weighted career winning
percentage)
7. Resource quality (offense) 0.064 0.138 0.218∗∗∗ 0.130∗∗ 0.254∗∗∗ 0.026 0.068 0.153∗∗∗
8. Resource quality (defense) 0.066 0.131 0.152∗∗∗ 0.133∗∗ 0.117∗∗ 0.096∗ 0.072† 0.149∗∗∗ 0.072
9. Previous organizational 0.497 0.146 0.364 0.306∗∗∗ 0.308∗∗∗ 0.159∗∗∗ 0.313∗∗∗ 0.431∗∗∗ 0.353∗∗∗ 0.292∗∗∗
performance
10. Rivalry intensity 2.962 1.011 −0.028 −0.054 0.088∗ −0.115∗∗ 0.033 0.004 −0.001 0.025 0.002
11. Strike year flag 0.093 0.291 −0.001 0.058 −0.431∗∗∗ 0.478∗∗∗ 0.039 0.038 0.005 0.006 0.008 −0.217∗∗∗
12. Salary cap flag 0.442 0.497 0.001 0.005 0.060 −0.067 −0.084∗ −0.025 −0.013 −0.013 −0.024 0.057 −0.306∗∗∗
13. League reorganization flag 0.005 0.070 −0.089∗ −0.025 −0.065† −0.064 −0.067† −0.144∗∗∗ −0.034 −0.036 −0.248∗∗∗ 0.011 −0.024 0.078†
14. Manager succession flag 0.201 0.401 −0.173∗∗∗ −0.144∗∗∗ −0.104∗∗ −0.076∗ −0.273∗∗∗ −0.569∗∗∗ −0.081† −0.072† −0.186∗∗∗ −0.002 −0.051 0.072† 0.143∗∗∗
15. Average draft position 4.691 0.302 0.176∗∗∗ 0.153∗∗∗ 0.090∗ 0.134∗∗ 0.168∗∗∗ 0.177∗∗∗ 0.108∗∗ 0.142∗∗∗ 0.337 −0.069 0.159∗∗∗ −0.510∗∗∗ −0.101∗ −0.118∗∗
16. Average age 27.335 11.725 −0.077† −0.007 −0.018 −0.032 −0.022 −0.034 −0.015 −0.016 0.011 0.084∗ −0.027 0.090∗ −0.007 0.007 −0.021
a
n = 602 for all variables.
∗∗∗
p < 0.001; ∗∗ p < 0.01; ∗ p < 0.05; †p < 0.10
b
Results for year dummy variables are available upon request.
Managerial Ability as a Source of Resource Value Creation
Strat. Mgmt. J., 30: 457–485 (2009)

473
DOI: 10.1002/smj
474
Table 2. Panel data analysis: effect of managerial ability (using weighted career winning percentage) and managerial ability/resource quality interaction on resource
productivitya
Resource productivity (offense) Resource productivity (defense)

Model 1 Model 2 Model 3 Model 1 Model 2 Model 3
Intercept −4.891∗∗∗ −4.551∗∗∗ −4.335∗∗∗ −2.423∗ −2.352∗∗ −2.306∗∗

(1.194) (1.157) (1.161) (1.153) (1.147) (1.147)
Competitive rivalry 0.012 0.005 0.005 0.013 0.012 0.012

(0.062) (0.060) (0.059) (0.059) (0.059) (0.059)
Strike year flag −4.554∗∗∗ −4.545∗∗∗ −4.546∗∗∗ −0.363 −0.405 −0.406
(0.382) (0.368) (0.367) (0.354) (0.352) (0.352)
Salary cap flag 0.995∗∗ 0.960∗∗ 0.909∗ −0.503 −0.514 −0.516
(0.366) (0.353) (0.354) (0.348) (0.346) (0.345)
League reorganization flag −1.587† −1.282† −1.216 −0.854 −0.694 −0.669
(0.828) (0.803) (0.802) (0.795) (0.792) (0.793)
Manager succession flag −0.469∗∗∗ 0.077 0.061 −0.097 0.170 0.171
(0.145) (0.167) (0.167) (0.138) (0.164) (0.164)
Average draft position 0.967∗∗∗ 0.713∗∗ 0.668∗∗ 0.545∗∗ 0.436∗ 0.429∗
(0.232) (0.228) (0.229) (0.224) (0.226) (0.226)
Average age −0.005 −0.004 −0.004 −0.004 −0.003 −0.003
(0.005) (0.005) (0.005) (0.005) (0.005) (0.005)
Resource quality (offense) 2.970∗∗∗ 2.611∗∗∗ 2.876∗∗∗
(0.411) (0.402) (0.429)
T. R. Holcomb, R. M. Holmes Jr., and B. L. Connelly
Resource quality (defense) 0.760∗ 0.655∗ 0.776†

(0.383) (0.331) (0.462)
Managerial ability (using weighted career winning percentage) 2.172∗∗∗ 2.160∗∗∗ 1.085∗∗ 1.057∗∗
(0.371) (0.370) (0.369) (0.371)
Managerial ability × Resource quality (offense) −2.480∗∗
(1.234)
Managerial ability × Resource quality (defense) −1.281
(1.889)
Year dummy variablesb included included included included included included
Wald χ 2 534.30∗∗∗ 602.32∗∗∗ 617.95∗∗∗ 567.52∗∗∗ 582.55∗∗∗ 584.32∗∗∗
a
n = 602. Values are unstandardized regression coefficients.
∗∗∗
p < 0.001; ∗∗ p < 0.01; ∗ p < 0.05; †p < 0.10
b
DOI: 10.1002/smj
Strat. Mgmt. J., 30: 457–485 (2009)
Table 3. Panel data analysis: effect of managerial ability (using measurement scale) and managerial ability/resource quality interaction on resource productivitya
Resource productivity (offense) Resource productivity (defense)

Model 1 Model 2 Model 3 Model 1 Model 2 Model 3
Intercept −4.891∗∗∗ −3.519∗∗ −3.611∗∗ −2.423∗ −3.882∗∗∗ −3.904∗∗∗

(1.194) (1.173) (1.177) (1.153) (1.108) (1.106)
Competitive rivalry 0.012 0.001 0.003 0.013 −0.015 −0.013

(0.062) (0.061) (0.061) (0.059) (0.056) (0.056)
Strike year flag −4.554∗∗∗ −0.516 −5.319∗∗∗ −0.363 5.790∗∗∗ 0.359
(0.382) (0.363) (0.369) (0.354) (0.332) (0.329)
Salary cap flag 0.995∗∗ 0.156 0.271 −0.503 0.446 0.452
(0.366) (0.363) (0.360) (0.348) (0.331) (0.330)
League reorganization flag −1.587† −1.541 −1.535 −0.854 −0.599 −0.577
(0.828) (0.819) (0.819) (0.795) (0.817) (0.814)
Manager succession flag −0.469∗∗∗ −0.346∗∗ −0.346∗∗ −0.097 −0.025 −0.024
(0.145) (0.148) (0.147) (0.138) (0.136) (0.135)
Average draft position 0.967∗∗∗ 0.864∗∗∗ 0.857∗∗∗ 0.545∗∗ 0.684∗∗ 0.684∗∗
(0.232) (0.231) (0.231) (0.224) (0.218) (0.218)
Average age −0.005 −0.005 −0.005 −0.004 −0.004 −0.004
(0.005) (0.005) (0.005) (0.005) (0.006) (0.006)
Resource quality (offense) 2.970∗∗∗ 2.884∗∗∗ 2.882∗∗∗
(0.411) (0.408) (0.412)
Resource quality (defense) 0.760∗ 0.789∗∗ 0.790∗
(0.383) (0.407) (0.405)
Managerial ability (using composite measurement scale) 0.073∗∗∗ 0.072∗∗ 0.048∗∗ 0.047∗
(0.023) (0.023) (0.021) (0.021)
Managerial ability × Resource quality (offense) −0.073∗∗∗
(0.020)
Managerial ability × Resource quality (defense) −0.195∗
(0.985)
Year dummy variablesb included included included included included included
Wald χ 2 534.30∗∗∗ 554.47∗∗∗ 585.02∗∗∗ 567.52∗∗∗ 648.19∗∗∗ 668.43∗∗∗
a
∗∗∗
p < 0.001; ∗∗ p < 0.01; ∗ p < 0.05; †p < 0.10
b
Strat. Mgmt. J., 30: 457–485 (2009)

475
DOI: 10.1002/smj
coefficients for the high managerial ability/high

where: Y = resource productivity
+Y (offensive combination) resource quality interaction term and the low
X = managerial ability managerial ability/high resource quality interaction
Z = resource quality
term was also statistically significant χ 2 = 16.73,
p < 0.001, respectively).
Hypothesis 3 predicted that the indirect effect of
managerial ability on organizational performance
through resource synchronization is positive. That
is, superior managerial ability leads to more effec-
tive resource synchronization, which leads to bet-
ter performance. Again, the resource context is
+Z expected to affect this relationship, weakening its
–Y strength at higher levels of resource quality. We
–X represent this relationship with Hypothesis 4. We
–Z calculated the coefficients used to test the under-
+X lying direct and indirect effects based on four
steps recommended by Baron and Kenny (1986).
Figure 1. Interaction of managerial ability and resource
quality on the level of resource productivity for offensive Table 4 reports the test of this hypothesis. In
combinations Step 1, we regressed organizational performance
(the dependent variable) on the control variables,
including a control for resource quality (Model 1).
We then added our composite measure of man-
+Y
agerial ability and the interaction term (Model
where: Y = resource productivity
2).10 The coefficient for managerial ability and the
(defensive combination) interaction term are significant (managerial ability:
X = managerial ability
Z = resource quality b = 0.009; p < 0.001; managerial ability/resource
quality: b = −0.017; p < 0.10). In Step 2, we
examined direct and moderated effects on resource
synchronization (Model 3). Managerial ability and
the association of the managerial ability/resource
quality term with resource synchronization are
+Z also significant (managerial ability: b = 0.086;
p < 0.01; managerial ability/resource quality: b =
–Y −0.236; p < 0.01). In Step 3, we regressed perfor-
–X
mance on resource synchronization without man-
+X
–Z agerial ability and the interaction term (Model
4). Resource synchronization, as expected, is pos-
Figure 2. Interaction of managerial ability and resource itively and significantly associated with perfor-
quality on the level of resource productivity for defensive mance (b = 69.064; p < 0.001). Finally, we added
combinations managerial ability and the managerial ability/
resource quality term to the model. As shown in
combination (with high managerial ability: b = Model 5, the relationship between resource syn-
−66.472; p < 0.001; using the composite mea- chronization and performance is positive and sig-
surement scale: b = −12.632; p < 0.001). Using nificant (b = 68.648; p < 0.001). However, the
Stata’s test command to test linear hypotheses after coefficients for managerial ability and the inter-
estimation, we verified the interaction terms dif- action term are no longer significant, suggesting
fered statistically from each other. The difference mediation. Results of the Sobel test using the prod-
between the coefficients for the high managerial uct of coefficients formula confirm the mediating
ability/low resource quality interaction term and
10
the high managerial ability/high resource qual- In supplementary analyses, we used the measure of managerial
ability based on Dirks’ (2000) weighted career winning percent-
ity interaction term was statistically significant age formula. Using this alternative measure did not substantively
(χ 2 = 5.62, p < 0.01). The difference between the change our results.
DOI: 10.1002/smj
Table 4. Panel data analysis: indirect effect of managerial ability and the managerial ability/resource quality interaction on organizational performancea
Model 1 Model 2 Model 3 Model 4 Model 5

Organizational Organizational Resource Organizational Organizational
performance performance synchronization performance performance
Intercept 0.091 0.129 −5.195∗∗ 0.310∗∗ 0.310∗∗

(0.152) (0.152) (1.695) (0.121) (0.128)
Previous organizational performance (prior three-year average) 0.377∗∗∗ 0.327∗∗∗ 4.326∗∗∗ 0.174∗∗ 0.044

(0.059) (0.061) (0.679) (0.051) (0.056)
Competitive rivalry −0.004 −0.005 0.001 −0.003 0.002
(0.007) (0.008) (0.087) (0.006) (0.007)
Strike year flag −0.006 −0.012 0.015 −0.052 0.009
(0.043) (0.047) (0.519) (0.036) (0.038)
Salary cap flag 0.028 0.034 0.321 0.015 0.016
(0.043) (0.046) (0.520) (0.036) (0.038)
League reorganization flag −0.007 −0.008 −0.621 −0.111 −0.106
(0.100) (0.107) (1.197) (0.096) (0.100)
Manager succession flag −0.052∗∗ −0.038∗ −0.325 −0.027† −0.028†
(0.019) (0.019) (0.211) (0.015) (0.016)
Average draft position 0.055† 0.053† 0.648 0.030 0.032
(0.032) (0.031) (0.352) (0.025) (0.026)
Average age −0.001∗ −0.001∗ −0.008 −0.001∗ −0.001∗
(0.000) (0.001) (0.007) (0.000) (0.001)
Resource quality (team) 0.091∗∗ 0.103∗∗ 1.815∗∗∗ 0.070∗∗ 0.065†
(0.042) (0.047) (0.529) (0.037) (0.041)
Resource synchronization 69.064∗∗∗ 68.648∗∗∗
(4.077) (4.141)
Managerial ability (using composite measurement scale) 0.009∗∗∗ 0.086∗∗ 0.003
(0.003) (0.035) (0.002)
Managerial ability × Resource quality (team) −0.017† −0.236∗∗ −0.019
(0.010) (0.117) (0.016)
Year dummy variables included included included included included
Wald χ 2 114.46∗∗∗ 125.69∗∗∗ 152.52∗∗∗ 449.33∗∗∗ 451.24∗∗∗
a
∗∗∗
p < 0.001; ∗∗ p < 0.01; ∗ p < 0.05; †p < 0.10

b
Strat. Mgmt. J., 30: 457–485 (2009)

477
DOI: 10.1002/smj
effect.11 Specifically, the relationship from man- important with less valuable resource portfolios.
agerial ability to performance through resource In other words, an underlying premise of strategic
synchronization is positive and significant (z = management theory is that managers influence
3.350; p < 0.001). The relationship from man- performance, and we empirically demonstrate that
agerial ability/resource to performance through an important means through which managers do
resource synchronization is negative and signifi- so is by more effectively bundling, deploying, and
cant (z = −2.011; p < 0.05). Thus, we find sup- synchronizing resources the firm controls.
port for Hypotheses 3 and 4. This study makes an important contribution to
the resource-based perspective. Although resources
may provide a performance advantage, realizing
DISCUSSION this advantage depends on the way in which man-
agers bundle, deploy, and synchronize resources
This study demonstrates that managers are an (Lichtenstein and Brush, 2001; Newbert, 2007;
important source of value creation, providing Sirmon et al., 2007). Prior research from the
insight into the argument that managers and resource-based perspective envisions a firm’s re-
resources jointly determine firm success (Castanias source endowment as an antecedent to perfor-
and Helfat, 2001). Our results reveal three main mance advantage. We add that management and
findings. First, managers differ with respect to their synchronization processes figure importantly in
ability to manage resources, and these differences firms’ ability to realize a performance advantage.
help explain why some firms create more value Further, as results indicate, some managers are bet-
from their resources than others do. Scholars have ter able to effectively manage and synchronize firm
criticized resource-based research for neglecting resources than others.
the influence of managers on resources (Priem and From an empirical standpoint, our study sup-
Butler, 2001; Sirmon et al., 2007). Not including ports recent extensions of resource-based logic by
managers in a study’s empirical design essentially providing evidence that managers and resources
assumes homogeneity in managerial ability across jointly determine advantages gained over time.
firms. We show this is not a realistic assumption. Although previous research establishes the gen-
Second, the influence of managerial ability is eral link between managers and different perfor-
contingent on the quality of a firm’s resources. mance outcomes (e.g., Carpenter and Frederickson,
Managers with superior ability have a stronger 2001; Eisenmann, 2002; Hambrick et al., 1996;
effect on resource productivity when the quality Hayward and Hambrick, 1997; Miller and Sham-
of individual resources is lower. However, the sie, 2001; Smith et al., 1991), our extension to
statistical significance of this effect differs between resource-based theory is that managers’ abilities
bundles, suggesting this relationship may vary as to create greater resource value underlie this link.
a function of the tasks each bundle performs. We find empirical support for this view, showing
Third, managerial ability plays an important role in that resource synchronization mediates the influ-
determining how firms synchronize their resources ence of managerial ability on organizational per-
to create a performance advantage. Specifically, formance. This finding has important implications
we find the effect of managerial ability on for resource-based theory, highlighting some of the
performance through resource synchronization is boundary conditions that potentially influence pro-
positive. This relationship becomes increasingly ductive resource output and organizational perfor-
mance. This study is one of the first to hypothesize
explicitly and find such a mediating relationship.
11
A key, and often implicit, assumption in standard tests for We also find an important interaction effect
mediation is that estimated equations in the set are uncorrelated.
In supplementary analyses, we applied a two-stage least squares between managerial ability and resource quality.
(2SLS) approach, which is an instrumental variable estimation In particular, managerial ability becomes increas-
technique, in tests for mediation to account for the possibility that ingly important in firms at lower levels of resource
error terms from our tests could violate these assumptions (see
Shaver, 2005, for further description of this method). Specifi- quality. This relationship is less evident in firms
cally, we used Stata’s ivreg procedure with robust estimators that with superior resource endowments, which sug-
provide controls for autocorrelation. The results did not substan- gests high-quality resources may already be per-
tively change; coefficients for variables of interest to this work
were significant and in the expected direction. We are thankful forming at ‘peak’ levels. Resource-based theory
to an anonymous reviewer for this suggestion. suggests that performance varies as a function
DOI: 10.1002/smj
of the value, rarity, imitability, and substitutabil- and more able managers during times of cri-
ity of resources firms’ control (Barney, 1991). sis, such as when performance declines (Robbins
Our finding extends this view by suggesting the and Pearce, 1992; Barker and Duhaime, 1997),
influence of able managers on resource value cre- especially when declines deplete the value of
ation depends on the quality of the resources. a firm’s resource endowment. Crisis firms often
Finally, this finding addresses the concerns of possess inadequate or underperforming resources
scholars admonishing resource-based theorists for (Hambrick and D’Aveni, 1988). In these circum-
overlooking factors that condition the value that stances, new and more able managers can poten-
firms create from their resources (Priem and But- tially develop bundling and deployment strategies
ler, 2001). that more effectively match resources to the com-
Our study also contributes to the literature petitive context. These actions can improve the
on managerial ability. A considerable amount of value of resources the firm controls, allowing it
research in applied psychology and management to reverse its fortunes (Morrow et al., 2007).
literatures addresses the ability construct (Hunter
and Hunter, 1984; Phillips and Gully, 1997; Ree, Limitations
Earles, and Teachout, 1994). These scholars have
established a reasonably clear connection between The findings related to the relationship between
individual ability and both individual and group managerial ability, resource quality, and resource
performance (Earley and Lituchy, 1991; Spreitzer productivity point to one of the limitations of
et al., 1997; Thomas and Mathieu, 1994). How- the current work. The data suggest that manage-
ever, from a strategic perspective, managerial abil- rial actions involving the bundling, deploying, and
ity is relatively unexplored and rarely operational- synchronization of firm resources intervene in the
relationship between managerial ability and per-
ized. Conceptually, we establish the critical role
formance. However, we did not examine individ-
of managerial ability in the resource-based view.
ual resource management processes, such as the
Further, we put forward a more specific definition
actions taken to structure the resource portfolio.
of managerial ability, synthesize relevant research,
Professional football teams, like organizations in
and examine the influence of managerial ability in
other industries, differ with respect to their poli-
a context that is amenable to capturing the con-
cies about the structure of their resource portfolio
struct. We also develop a measure of managerial and their philosophies governing actions they pur-
ability as an individual-level construct that man- sue between seasons (Allen et al., 1979). Part of
agers carry with them between firms. the explanation behind our findings may be that
Our study also has several implications for man- able managers are more effective at structuring
agers. Perhaps the most obvious implication is that their resources, rather than effectively bundling
managers do matter. The resource-based perspec- and deploying them. Future research that accounts
tive clearly establishes the importance of resources for the effects of different resource management
in determining performance differences between processes (e.g., Holcomb, Holmes, and Hitt, 2006;
firms, but our study adds that resources are not Morrow et al., 2007; Sirmon et al., 2007) may
sufficient by themselves. Firms must pay close contribute to our understanding of the processes
attention both to their resource endowment and that underlie our findings.
to the ability of their managers to extract value Our measure of organizational performance is
from those resources. Managers themselves would not without its limitations. Although one team’s
also do well to recognize that improving their abil- win is another team’s loss, winning percentage
ity to extract value from resources is a skill that as a measure of organizational performance does
can transcend organizational boundaries. Taking not quantify the degree of advantage directly
conscious steps to increase their own managerial achieved by an organization relative to rivals.
ability, therefore, may make them more successful Indeed, because competitive contests are a zero-
as they enter new organizational contexts. sum game, this measure embeds the mean value
The foremost implication for managers may of 0.500 (or 50%) for all teams in the league
be that managerial ability is most important in within a team’s winning percentage for the season,
firms with lower quality resources. This idea sug- making it different from conventional measures of
gests that firms may be justified in pursuing new relative performance. Further, this work also stops
DOI: 10.1002/smj
short of examining the sustainability of an organi- 1987; Cannella and Holcomb, 2005). A more com-
zation’s performance advantage over time. Future plete analysis of managerial ability could incorpo-
research might consider the extent to which man- rate specific managerial styles and related cogni-
agerial ability not only contributes to differences in tive factors.
performance between organizations more directly,
but also influences the persistence and sustainabil- Future research
ity of a performance advantage over time. Such
questions are important in light of research sug- A number of additional areas for research seem
gesting that competitive dominance and sustain- evident. An interesting and potentially important
ability can exist independently, and sports leagues question is whether and how a firm’s environmen-
may be one of many valuable and nontraditional tal context affects resource productivity. Because
contexts in which to study such phenomena (e.g., of high environmental uncertainty and varying
Powell, 2003). degrees of environmental munificence, realizing
Given the peculiarities of professional sports a performance advantage over time is difficult
teams, it is also reasonable to speculate about (Lichtenstein and Brush, 2001). As a result, firms
the generalizability of these findings to firms in often seek to establish a series of temporary advan-
other industries. Head coaches have options avail- tages (Holcomb et al., 2006). Uncertainty created
able to influence performance outcomes in ways by instability in the environment produces infor-
not directly analogous to the options available mation deficits, making cause-and-effect relation-
to managers in traditional business organizations. ships difficult to identify and interpret. For exam-
For example, whereas senior executives often wait ple, Carpenter and Frederickson (2001) found that
long periods before the results of specific resource environmental uncertainty moderated the relation-
ship between the characteristics of top manage-
management actions are known, coaches often
ment teams and the strategic posture of their
receive immediate feedback on the outcome of
firms, such that the effect was stronger at mod-
decisions they make and can adjust bundling and
erate levels of uncertainty. Extending such anal-
deployment actions more quickly. Nonetheless,
ysis to the framework presented here may reveal
professional football teams do resemble traditional
additional contingencies surrounding the effects of
organizations in that football teams utilize a divi-
managerial ability, resource quality, and resource
sion of labor similar to the M-form structure productivity on the competitive advantage a firm
(see Chandler, 1962). As in traditional organiza- achieves.
tions, success depends critically on human capi- Another interesting question is whether and to
tal and the ways in which it is used (Hitt et al., what extent managerial discretion (i.e., latitude
2001; Hatch and Dyer, 2004; Kor and Leblebici, of managerial action; Hambrick and Finkelstein,
2005). Further, this study does not examine per- 1987) strengthens or weakens the effect of man-
formance variations in resource productivity and agerial ability on resource value creation and per-
synchronization attributable to different institu- formance. Although the answer seems simple with
tional influences or environmental contingencies. respect to productive resource output, research
In this work, we address the immediate effects suggests that managerial discretion may have dif-
of managerial ability on resource productivity and ferent indirect effects on performance outcomes
organizational performance in an empirical setting depending on other internal and external factors
that partially controls for such external conditions. (e.g., power and environmental uncertainty; see
Nonetheless, although we believe that there are Haleblian and Finkelstein, 1993). Since discretion
similarities that may make these results applica- necessarily endows managers with more latitude
ble to other types of organizations, including cor- to pursue significant strategic change, is it possi-
porations and governmental agencies, we would ble for managers with greater discretion to extract
encourage replication in other industry and insti- more value from higher quality resources? Con-
tutional contexts. versely, might such discretion be dysfunctional,
Finally, this study does not examine these rela- especially in the presence of agency problems
tionships in view of other managerial attributes, (e.g., Makadok, 2003)? Similarly, to what extent
such as personality and values (e.g., Pfeffer, 1977; does managerial discretion and managerial ability
Hambrick and Mason, 1984; Meindl and Ehrlich, interact with specific resource management actions
DOI: 10.1002/smj
to affect resource-based performance advantages? Aiken LS, West SG. 1991. Multiple Regression: Testing
We believe it is important for researchers to and Interpreting Interactions. Sage: Newbury Park,
CA.
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Alchian AA, Demsetz H. 1972. Production, information
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plexities surrounding relationships between man- in regression analysis. Sociological Methodology 20:
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organizational rent. Strategic Management Journal
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actions in the resource-based view by demonstrat- 24(4): 347–369.
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of this manuscript at the 2005 Academy of Man- Berman SL, Down J, Hill CWL. 2002. Tacit knowledge
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