Consequences of Executive Focus on Support Activities: Evidence from Executive Influence on Firm Tax Strategy

Abstract

Should executives solely focus on core activities of the firm? Or is it beneficial to focus on both core and support activities? If core and support activities are substitutes, focusing on both activities will take energy and attention away from core activities. If core and support activities are complements, focusing on both activities may lead to synergies and knowledge spillover. Further, it could be the case that individual executive characteristics impact these relations. Using executive influence on firm tax strategy as a proxy for executive focus on support activities, I find that executive focus on support activities is associated with poorer firm performance and negative executive labor market consequences. These results are partially moderated by executive ability and background. Overall, the results suggest top executives perform best when focused solely on core activities, consistent with core and support activities being substitutes.