MOVERS AND SHAKERS

Robert Akerlof and Richard Holden

Most projects in most walks of life require the participation of multiple partiesWhile it is difficult to unite individuals in a common endeavor some people who wecall lsquolsquomovers and shakersrsquorsquo seem able to do it The article specifically examinesmoving and shaking of an investment project whose return depends on its qualityand the total capital invested in it We analyze a model with two types of agentsmanagers and investors Managers and investors initially form social connectionsManagers then bid to buy control of the project and the winning bidder puts effortinto making investors aware of it Finally a subset of aware investors are given thechance to invest and they decide whether to do so after receiving private signals ofthe projectrsquos quality We first show that connections are valuable since they make iteasier for a manager to lsquolsquomove and shakersquorsquo the project (ie obtain capital frominvestors) When we endogenize the network we find that while managers areidentical ex ante a single manager emerges as most connected he consequentlyearns a rent In extensions we move away from the assumption of ex ante identicalmanagers to highlight forces that lead one manager or another to become a moverand shaker Our theory sheds light on a range of topics including entrepreneurshipventure capital and anchor investments JEL Codes D31 D85 G30 L26

I Introduction

Most projectsmdashin business politics sports and academiamdashrequire the participation of multiple parties In business theyusually involve among other things raising capital from dispa-rate sources Many projects failmdashor do not ever get off thegroundmdashbecause of the difficulty of bringing together the rele-vant parties Although it is not easy to unite individuals in acommon endeavor some peoplemdashoften called lsquolsquomovers and sha-kersrsquorsquomdashseem able to do it This article develops an equilibriumtheory regarding who these movers and shakers will be andwhy they receive outsize compensation for their endeavors

Skill of course helps in obtaining participation since peopleare more inclined to participate in skillfully run projects Another

We are grateful to the editors Andrei Shleifer and Pol Antras and three anon-ymous referees for detailed and thoughtful suggestions We also thank GeorgeAkerlof Wouter Dessein Rosalind Dixon Bhaskar Dutta Bob Gibbons OliverHart Bengt Holmstrom Johannes Horner Rachel Kranton Hongyi Li BarryNalebuff Michael Powell and especially Andrea Prat for helpful discussions andseminar participants at ANU the Spring 2015 NBER Organizational Economicsmeetings MIT LMU Munich Oxford Paris 2e QUT UMass Amherst UNSW andYale Holden acknowledges support from the Australian Research Council (ARC)Future Fellowship FT130101159

The Author(s) 2016 Published by Oxford University Press on behalf of Presidentand Fellows of Harvard College All rights reserved For Permissions please emailjournalspermissionsoupcomThe Quarterly Journal of Economics (2016) 1849ndash1874 doi101093qjeqjw021Advance Access publication on June 12 2016

1849

attributemdashsocial connectednessmdashcan also make someone amover and shaker Someone who is well connected can increaseparticipation not only by making agents aware of a project buteven more important by making agents aware that others areaware and are considering participating Expressed differentlyconnections help in raising awareness and in making that aware-ness common knowledge

In our baseline model there are a number of potential man-agers of a projectmdashall equally skilledmdashand a number of potentialinvestors Initially there are no connections between managersand investors The model has four stages In stage 1 investorsform connections with managers For simplicity we assume eachinvestor can link to one manager In stage 2 managers bid to buyan asset The asset is necessary for undertaking the project andentitles the owner to the projectrsquos return For instance if theproject were the construction of a shopping mall the assetmight be the plot of land on which the mall is to be built Instage 3 the winning bidder puts effort into raising awarenessof the project among investors and gives a subset of the awareinvestors the chance to invest In stage 4 investors given thechance to invest decide whether to do so after receiving privatesignals of the projectrsquos quality

We first analyze the model taking the social network betweenmanagers and investors as exogenous (ie we exclude stage 1)Connections increase a managerrsquos valuation of the asset becausethey make it easier to raise capital for the project Consequentlyin equilibrium the managermdashor one of the managersmdashwho ismost connected wins the auction and puts effort into movingand shaking the project Furthermore provided the auctionwinner is strictly more connected than other managers he re-ceives a higher expected payoff

When we endogenize the social network (ie add stage 1) wefind that all investors link to one particular manager whom wemay refer to as M Therefore even though managers are identicalex ante one manager (M) emerges as most connected M wins theauction moves and shakes the project and earns a higher payoffthan other managers Investors link to the same manager in equi-librium because they have a preference to link to whichever man-ager is most connected The most connected manager ends upcontrolling the project unless an investor connects to the man-ager who controls the project he will not have an opportunity toinvest

QUARTERLY JOURNAL OF ECONOMICS1850

We later extend the model by making managers heteroge-neous along several dimensions (i) their skill at running the proj-ect (ii) their talent at communicating with investors and (iii)how much capital they have personally We assume that man-agers can use their personal capital as seed money for the projectTaking the social network as exogenous we find that these char-acteristics affect how much managers value the project and whichone of them becomes mover and shaker When we endogenize thenetwork we find that these characteristics are also predictive ofwho emerges as most connected

In thinking about movers and shakers it is useful to have aconcrete example in mind To that end consider WilliamZeckendorf who was in the 1950s and 1960s the preeminentreal estate developer in the United States He undertook a varietyof ambitious projects including Mile High Center in downtownDenver Place Ville-Marie in Montreal and LrsquoEnfant Plaza inWashington DC He was also famous for his role in bringingthe United Nations to New York1 Key to Zeckendorfrsquos success(and his ability to move and shake) were his social connectionsas he recognized himself lsquolsquothe greater the number of groups one could interconnect the greater the profitrsquorsquo (Zeckendorf andMcCreary 1970 p 42) He knew all the important real estatebrokers bankers and insurance agents he served on numerouscorporate boards and he was a fixture of New York societyZeckendorf also owned a nightclub the Monte Carlo where hewould hold court several nights a week entertaining friends andbusiness acquaintances

His Montreal project Place Ville-Marie provides an excellentexample of his talents as a mover and shaker Since the 1920s theCanadian National Railway (CNR) had been attempting withoutsuccess to develop a 22-acre site in downtown Montreal adjacentto the main train station lsquolsquoa great soot-stained angry-lookingopen cut where railway tracks ran out of a three-mile tunnelrsquorsquo(Zeckendorf and McCreary 1970 p 167) Although the site hadenormous potential Canadian developers shied away consideringthe challenges too daunting Desperate CNR approached

1 Upon learning of the United Nationsrsquo difficulty finding a suitable New Yorksitemdashand their intention to locate in Philadelphiamdashhe realized he could help Heoffered them a site he had assembled on the East River for a large development

MOVERS AND SHAKERS 1851

Zeckendorf in 1955 He was immediately enthusiastic appreciat-ing that lsquolsquoa sort of Rockefeller Center-cum-Grand Central Stationcould create a new center of gravity and focal point for the cityrsquorsquo(Zeckendorf and McCreary 1970 p 170) Making this vision a re-ality would require the participation of two constituencies Firsthe would need to raise large sums from investors $100 million forthe tower he proposed to build as the sitersquos centerpiece Secondand even more vexing was the challenge of leasing office spaceEvery major company had its offices on St James Street lsquolsquoThe veryidea of a shift to center-town offices struck many as dangerouslyradicalrsquorsquo (Zeckendorf and McCreary 1970 p 174) Zeckendorf ini-tially faced a freeze unable to get anyone to lease space As he putit lsquolsquonobody believed we would ever put up a project as big as wesaid we wouldrsquorsquo (Zeckendorf and McCreary 1970 p 174) Butthrough his tireless efforts the freeze began to thaw The firstcrack came when he convinced the Royal Bank of Canada tomove into the new building and become its prime tenant He hadbeen introduced to the CEO James Muir by his friend JohnMcCloy chairman of Chase Zeckendorf set out to woo Muirmaking him his Canadian banker With RBC lined up he man-aged with considerable pressing to obtain a $50 million loan fromMet Lifemdashhalf of what was needed Also with considerable press-ing he lined up a second big tenant Aluminium Limited At thatpoint it became clear that the project would indeed become a re-ality Other companiesmdashwhich had previously turned him downmdashagreed to take space and he was able to obtain the additionalcapital he needed

Our theory sheds light on a range of topics one of which isentrepreneurship Founding a business often requires moving andshaking One can think of real estate developers such asZeckendorf as a type of entrepreneur A number of ideas havebeen advanced regarding entrepreneursrsquo function Schumpeter(1934) for instance stresses their role as innovators involved inlsquolsquocreative destructionrsquorsquo Knight (1921) sees them primarily as risk-takers Rajan and Zingales (1998) highlight their role in regulatingaccess to resources Others such as Baumol (2010) bemoan thatdespite economistsrsquo long-standing interest lsquolsquo[entrepreneurs] arealmost entirely excluded from our standard theoretical modelsrsquorsquo(Baumol 2010 p 2) Our theory offers a new perspective on theirrole The aspect of entrepreneurship captured by our model is newto economics but it is related to theoretical perspectives in sociol-ogy Ronald Burt for instance argues that entrepreneurs exploit

QUARTERLY JOURNAL OF ECONOMICS1852

network position In his terminology they bridge lsquolsquostructuralholesrsquorsquo He writes that lsquolsquobringing together separate pieces [of a net-work] is the essence of entrepreneurshiprsquorsquo (Burt 2001 p 210)

Our theory also speaks to the role of venture capitalistsAccording to Kaplan and Schoar (2005) venture capital (VC)funds on average yield roughly the same return net of fees asthe SampP 500 however certain fund managers consistently out-perform the market achieving higher risk-adjusted returns Thestandard interpretation of this finding is that these fund man-agers are particularly skilled at originating investment ideasAlthough this is a possibility the model suggests a novel expla-nation Such fund managers may instead earn high returns bymoving and shaking Such VC firms take an equity stake in astartup then they move and shake on the companyrsquos behalf (inparticular helping the startup find additional investors) For ex-ample Andreessen Horowitz one of the preeminent SiliconValley VC firms lsquolsquomaintains a network of twenty thousand con-tacts and brings two thousand established companies a year to itsexecutive briefing center to meet its startupsrsquorsquo According to MarcAndreessen lsquolsquowe give our founders networking superpowerrsquorsquo2

Additionally seeding of projectsmdashor lsquolsquoanchor investmentsrsquorsquomdashseems to be empirically important Movers and shakers are oftenindependently wealthy and use their own funds to seed projectsIn other instances a mover and shaker might obtain help inseeding a project from a large investor Our model speaks tothis topic as well and we discuss this briefly in the conclusion

Our article relates to a number of different literatures At aformal level the problem we analyze is a global game and thusrelates to the now large literature pioneered by Carlsson and vanDamme (1993) and Morris and Shin (1998)

The model we analyze also relates to large theoretical andempirical literatures in finance A natural benchmark for

2 Tad Friend lsquolsquoTomorrowrsquos Advance Manrsquorsquo New Yorker May 18 2015 re-trieved from httpwwwnewyorkercom In line with this view HochbergLjungqvist and Lu (2007) find that venture capitalists with superior network po-sitions earn higher returns It is not a matter of indifference to a startup of coursewhich VC firm invests A startup would rather take money from a VC that is betterat moving and shaking Lower-ranked VCs in consequence find it hard to competeAndreessen puts it this way lsquolsquoDeal flow is everything If yoursquore a second-tier firmyou never get a chance at that great companyrsquorsquo (Friend lsquolsquoTomorrowrsquos AdvanceManrsquorsquo)

MOVERS AND SHAKERS 1853

thinking about investments and returns is of course Q-theory3

In Q-theory investors earn the same rate of return whether theyinvest $1 or $1 million By contrast investment is lumpy in ourmodel Agents invest in projects projects yield a poor rate ofreturn unless they are well capitalized An important conse-quence is that the rate of return to a projectasset depends onthe social network that exists among agents We predict more-over that agents with a privileged position in the network willearn outsize returns because they can move and shake contribu-tions from others4 Our model is to the best of our knowledge thefirst to emphasize the importance of network structure forinvestment

Our article connects to the economic literature on net-worksmdashparticularly work on network formation In the endoge-nous network version of our model investors have a preference tolink to the most important manager This feature of our model isreferred to as lsquolsquopreferential attachmentrsquorsquo Two classic papersJackson and Wolinksy (1996) and Bala and Goyal (2000) showthat this force will generally lead to the emergence of a starnetwork5

Although our focus is an investment setting our model alsorelates to a literature on attention within organizationsmdashsee es-pecially Dessein (2002) Dessein and Santos (2006 2014) AlonsoDessein and Matouschek (2008) Rantakari (2008) Calvo-Armengol de Marti and Prat (2015) and Dessein Galeotti

3 A host of papers have documented departures from Q-theory and high-lighted the implications of such departures Liquidity constraints are important(see among others Fazzari Hubbard and Petersen 1988 Hoshi Kashyap andScharfstein 1991 Blanchard Lopez de Silanes and Shleifer 1994 KashyapLamont and Stein 1994 Sharpe 1994 Chevalier 1995 Kaplan and Zingales1997 Lamont 1997 Peek and Rosengren 1997 Almeida Campello andWeisbach 2004 Bertrand and Schoar 2006) as are short-term biases (Stein 19881989) Moreover there is compelling evidence that there are real consequences ofsuch inefficiencies (see for instance Morck Shleifer and Vishny 1988 and thelarge ensuing literature on the equity channel of investment)

4 Another quite distinct form of lsquolsquolumpinessrsquorsquo has been well studied adjust-ment costs (see Uzawa 1969 Lucas and Prescott 1971 Hayashi 1982 and for arecent dynamic analysis Miao and Wang 2014) It is well known that such lump-iness can have significant macroeconomic implications (see for instance Lucas1967 Prescott 1986 Caballero Engel and Haltiwanger 1995)

5 Other papers that predict the emergence of star networks include GaleottiGoyal and Kamphorst (2006) Goyal and Vega-Redondo (2007) Feri (2007)Hojman and Szeidl (2007) Bloch and Dutta (2009) and Galeotti and Goyal (2010)A recent paper that is particularly relevant is Herskovic and Ramos (2015)

QUARTERLY JOURNAL OF ECONOMICS1854

and Santos (2014) Agents in these models as in our own wish tocoordinate their actions In Calvo-Armengol de Marti and Prat(2015) agents decide whom to pay attention to attention is dis-persed in equilibrium in contrast to our model in which attentionis concentrated on a mover and shaker6 Dessein and Santos(2014) and Dessein Galeotti and Santos (2014) consider a settingin which a principal decides the allocation of attention They findthat it is optimal for there to be some concentration of attentionbecause it aids coordination Attention is also concentrated in ourmodel but it is not necessarily optimally placed In particular weobtain equilibria in which the mover and shaker is more or lessskilled resulting respectively in a more or less efficient outcome7

Another related paper Hellwig and Veldkamp (2009) examinesattention in a trading rather than an organizational settingSomewhat analogous to the coordination of attention in our set-ting they find traders may coordinate attention on one piece ofinformation or another

Our model relates to the economic literature on leadershipsince a mover and shaker is arguably a type of leader It particu-larly relates to work examining how leaders persuade followersSeveral publications consider signaling by leaders as a means ofpersuasion (see for instance Prendergast and Stole 1996Hermalin 1998 Majumdar and Mukand 2004) There is alsowork on leaders creating cascades to influence followers (seeCaillaud and Tirole 2007) In our article the mover and shakerpersuades investors by publicizing the project This feature of ourmodel bears some relation to Dewan and Myatt (2007 2008) whohave explored how public speeches by politicians can influencefollowers Chwe (2001) emphasizes the role of public announce-ments in acting as coordination devices in a variety of settingssuch as advertising In addition there is work on the use of

6 In Calvo-Armengol de Marti and Prat (2015) agentsrsquo attention is dispersedin equilibrium because there are neither increasing costs nor decreasing benefits oflistening to multiple agents

7 Intuitively investors coordinate on linking to a particular manager whoseskill may be higher or lower This finding suggests the possibility of constructing amover-and-shaker model similar to our own in which there are persistent perfor-mance differences across firms Some firms get stuck paying attention to the wrongpeople Persistent performance differences have been shown to be ubiquitous (seeGibbons and Henderson 2012) There is considerable interest in understandingwhat drives these productivity differences (see Gibbons 2006 Chassang 2010Ellison and Holden 2014)

MOVERS AND SHAKERS 1855

authority by leaders in settings where agents as in our modelhave a desire to coordinate For instance Bolton Brunnermeierand Veldkamp (2013) argue that resoluteness is an importantquality in a leader because a leader who is overly responsive tonew information can undermine coordination

The article proceeds as follows Section II contains the setupof our model and the analysis of equilibrium We first take thenetwork structure as exogenous subsequently we endogenize itIn Section III we consider a number of extensions of the basicmodel analyzed in Section II Section IV concludes Proofs of allformal results are contained in the Online Appendix

II The Model

IIA Statement of the Problem

Consider a setting with an investment project and two typesof agents managers and investors Managers have skills neededto run the project investors each have one unit of capital they cancontribute to the project We assume there are at least two man-agers the total number of managers and investors is finite LetNM denote the set of managers and NI denote the set of investors

A network g exists between agents gij = 1 if agent i and agentj are connected gij = 0 otherwise For now we take the network asexogenous we will endogenize it in Section IID

The model has four periods All choices made by agents areobservable In the first period managers bid in a second-priceauction for an asset A The asset is needed to undertake the proj-ect and entitles the owner to the projectrsquos return For instancethe asset might be a parcel of land the project might be theconstruction of a building on that parcel The project yields areturn R at the end of the game that depends on both the projectrsquosunderlying quality () and the amount of capital raised for theproject (K) More specifically R frac14 thorn v K where v gt 1 parame-terizes the return to raising capital (ie the return to moving andshaking) The agents have a common prior that is distributedNeth 2THORN with gt 0 Let bi denote manager irsquos bid in the auc-tion let beth2THORN denote the second highest bid and let M denote thewinning bidder In the event of a tie in the auction the managerof lowest index wins We assume managers do not follow biddingstrategies that are weakly dominated

QUARTERLY JOURNAL OF ECONOMICS1856

In the second period the auction winner M decides howmuch effort eM 2 frac1201 to exert to make investors aware of theproject An investorrsquos chance of becoming aware of the projectdepends on eM and on his degree of separation from MSpecifically investor j becomes aware with probabilityethlength path jMTHORN1 eM where ethlength path jMTHORN denotes thelength of the shortest path between investor j and M that doesnot include other managers ethlength path jMTHORN frac14 1 when nosuch path exists and 2 eth01THORN We assume mutual independenceof investorsrsquo awareness of the project The cost to M of exertingeffort is cetheMTHORN where c0eth0THORN frac14 0 and c0etheTHORN gt 0 for e gt 0 Let n denotethe number of investors who become aware of the project

In the third period M can offer aware investors equity in theproject in exchange for contributing their capital M chooses howmuch equity M to offer and the number m n of equity offershe will make The m investors who receive equity offers are ran-domly drawn from the pool of aware investors Let S denote theset of investors who receive equity offers Once drawn S is com-monly known to investors in set S

Investors in set S then receive private signals of the projectrsquosquality xj frac14 thorn ej where the ejrsquos are distributed iid Neth0 2THORN Wefocus on the case where 0 because this results in closed-formsolutions

In the final period investors who received equity offersdecide whether to take them Let aj 2 f01g denote investor jrsquosdecision Observe that the total capital raised for the project isK frac14

Pj2Saj

The project is then undertaken yields return R frac14 thorn v K and players receive the shares of the return due to them We canwrite playersrsquo payoffs at the end of the game as follows Investorsreceive a payoff of MR if they invest in the project and 1 other-wise The auction winner receives a payoff of eth1 MKTHORNR cetheMTHORN

beth2THORN and other managers receive 0It is useful to summarize the timing (i) managers simulta-

neously place bids (bi) for asset A and the winning bidder (M)acquires the asset (ii) the auction winner (M) decides howmuch effort to exert (eM) to make investors aware of the project(iii) M offers equity shares (M) to m n of the aware investors(iv) investors who receive equity offers then acquire private sig-nals of the projectrsquos quality and simultaneously decide whether toinvest (ai) after which the project is undertaken its return R isrealized and players receive the share of the return due to them

MOVERS AND SHAKERS 1857

IIB Discussion of the Model

We briefly discuss a number of the modeling choices we havemade

First our game has four periods and at first inspectionmight seem complicated in this respect In fact this is the sim-plest formulation that captures all the economics we wish toconvey It is important to us to highlight that in equilibriummore connected players value asset A more than less connectedplayers The simplest way to demonstrate this is through theauction we consider at time 1 Similarly the effort choice is in-dispensable to our story because this is what moving and shakingismdashhence time 2 Finally we need two periods to address invest-ment since it necessarily involves the equity offer and the choiceof whether to invest

Second we model the projectrsquos return as increasing in theamount of capital invested This results in strategic complemen-tarities and captures our basic story about the importance of par-ticipation Note that it is important that R is increasing in K oversome range it is not important that R is increasing in K indefi-nitely we have only made this assumption for simplicity

Third the set S is commonly known to investors in set S Thisassumption reflects the idea that the mover and shaker not onlyraises awareness of the project he also makes the existence of apool of potential investors common knowledge

Fourth we assume the marginal cost of effort is equal to 0 ateM = 0 (c0eth0THORN frac14 0) This ensures that it is optimal for M to exertpositive effort when he has social connections and the returns tomoving and shaking v are large More important it means thatmore connected managers value asset A strictlymdashrather thanweaklymdashmore than less connected managers when v is large

Fifth we consider a particular form of financial contractingequity The benefit of focusing on equity contracting is that itresults in closed-form solutions this is not the most general con-tracting space one could consider to be sure However we con-jecture that our main results hold in a more general contractingspace8

Sixth we adopt a common assumption regarding how infor-mation diffuses within the network (Jackson and Wolinsky 1996make a similar assumption) Under this assumption a managerrsquos

8 For instance we believe our results hold when the project is debt financedrather than equity financed

QUARTERLY JOURNAL OF ECONOMICS1858

ability to raise awareness depends on how many connections hehas of each degree9

Seventh we assume that S the set of investors who receiveequity offers once drawn is commonly known If one assumesthat this information can only be conveyed by M then the issueof strategic information transmission may arise We have side-stepped this issue by assuming that the information is simplyobservable An alternative approach would be to assume that Mconveys the information but it is lsquolsquohardrsquorsquo information

Finally one could imagine modeling movers and shakers in adifferent way Imagine an investment game with a good equilib-rium (with a high level of investment) and a bad equilibrium(with a low level of investment) The mover and shaker mightserve as a coordination device that makes the good equilibriumfocal Although it is certainly plausible that movers and shakersplay such a role there are three reasons it is not so appealing tomodel them in this way First Schelling-type focal points are in-teresting but not micro-founded and raise more questions thanthey answer Second the global games approach was developedprecisely to provide more rigorous answers to the multiple equi-librium problem Perhaps most important the global games ap-proach is more fruitful in generating predictions It yields theprediction that social connections matter for moving and shakingIt also allows us in extensions to the baseline model to describecharacteristics associated with movers and shakers

IIC Equilibrium

Our focus will be on pure-strategy perfect Bayesian equilib-ria which we refer to simply as the equilibria of the game

Some notation will be useful for characterizing the equilibriaLet dk

i denote the number of connections of degree k that manageri has to investors10 Let di denote the corresponding vectordi frac14 ethdk

i THORN1kfrac141 We define a partial ordering over the dirsquos as follows

9 Depending on how information diffuses within a network different networkproperties are important For a discussion see Banerjee et al (2013) Banerjee et al(2013) provide empirical evidence that an agentrsquos lsquolsquodiffusion centralityrsquorsquo is an im-portant determinant of ability to diffuse information (a concept that nests degreecentrality eigenvector centrality and Katz-Bonacich centrality)

10 By lsquolsquoa connection of degree krsquorsquo we mean an investor j for whomlength path ji frac14 k We will also refer to connections of degree 1 as lsquolsquodirectconnectionsrsquorsquo

MOVERS AND SHAKERS 1859

DEFINITION 1 We say that

(i) Manager i is weakly more connected than manager j(di dj) if

Xl

kfrac141

dki

Xl

kfrac141

dkj forall l

(ii) Manager i is strictly more connected than manager j(di gt dj) if

Xl

kfrac141

dki

Xl

kfrac141

dkj for all l and

Xl

kfrac141

dki gt

Xl

kfrac141

dkj for some l

Notice that di gt dj when manager i has more connections ofevery degree (dk

i gt dkj for all k) In addition di gt dj when man-

agers i and j have the same total number of connections but irsquosconnections are all direct and some of jrsquos are not

Proposition 1 characterizes the equilibria of the game Theproof is discussed in detail below

PROPOSITION 1 In equilibrium

(i) Managers bid their valuations of asset A in the auctionbi = Vi

(ii) Manager irsquos valuation of asset A is a function of his socialconnections Vi frac14 VethdiTHORN

(iii) VethdiTHORN is weakly increasing in di(iv) There exists v such that whenever the returns to moving

and shaking exceed v (v gt v)(a) VethdiTHORN is strictly increasing in di(b) Provided the manager who wins the auction has some

social connections (dM gt 0) he exerts positive effort(eM gt 0)

According to the proposition more connected managersvalue the project more than do less connected managersProvided the returns to moving and shaking are large (v gt v)they value the project strictly more The formal proof is givenlater but the intuition is straightforward more connected man-agers value the project more because they are more able to moveand shake the project (ie raise capital)

QUARTERLY JOURNAL OF ECONOMICS1860

Proposition 1 implies that if the returns to moving and shak-ing exceed v and one manager is more connected than his peershe becomes the projectrsquos mover and shaker and earns a positiverent from control of the project This is stated as a corollary

COROLLARY 1 Provided the returns to moving and shaking aresufficiently large (v gt v) if one of the managers is strictlymore connected than other managers he wins the auctionexerts positive effort to move and shake the project andearns a higher expected payoff than his peers

Let us now consider the proof of Proposition 1

Proof of Proposition 1 We can use backward induction tosolve for the equilibria of the game First consider time 4 Thetime 4 game is a global game As is standard in such games inequilibrium investors invest if and only if their private signalsexceed a cutoff xj gt Lemma 1 the proof of which is given in theOnline Appendix characterizes the cutoff for the case where0

LEMMA 1 As 0 the cutoff 1M v mthorn1

2

According to Lemma 1 investors are more inclined to invest( is lower) when (i) they are offered more equity (M is higher)and (ii) there are more investors who receive equity offers (m ishigher) It is intuitive that investors are more inclined to investwhen they are offered more equity They are more inclined toinvest when m is higher because they expect greater total invest-ment in the project leading to a higher overall return R

Turning to time 3 we can write the auction winnerrsquos ex-pected payoff as Methm MTHORN cetheMTHORN beth2THORN where Methm MTHORN de-notes Mrsquos expected share of the projectrsquos return when minvestors are offered equity shares of size M M will choose M

to maximize M MethmTHORN frac14 arg maxMethm THORN M will alsochoose m to maximize M subject to the constraint that m isless than or equal to the number of aware investors (n) methnTHORN frac14arg maxmnMethm

MethmTHORNTHORN We denote by MethnTHORN the value of

Methm MTHORN when m and M are chosen optimallyMethnTHORNmust be weakly increasing in n because as n increases

M is less constrained in his choice of mWe can also show that MethnTHORN is strictly increasing in n pro-

vided the returns to moving and shaking v are large Observe

MOVERS AND SHAKERS 1861

that as 0 investors who receive equity offers invest withprobability 1 when gt and with probability 0 when lt Consequently K = m with probability 1 when gt K = 0 withprobability 1 when lt This allows us to write an explicit for-mula for Methm MTHORN

Methm MTHORN frac14 Efrac12eth1 MKTHORNR

frac14 Efrac12eth1 MKTHORN eth thorn vKTHORN

frac14 Efrac12 thorn Efrac12vK eth1 MKTHORN Efrac12MK

frac14 thorn v meth1 MmTHORN Preth gt THORN

Mm Eethj gt THORN Preth gt THORN

where

frac141

M

vmthorn 1

2

From this formula for M we can show that Methm MethmTHORNTHORN is

strictly increasing in m (provided v is sufficiently large) The formalproof is given in the Online Appendix as part of the proof of Lemma2 but the intuition is straightforward The larger m is the easier itis for the auction winner to raise capital It is easier because thereare more potential investors it is also easier because any giveninvestorrsquos willingness to invest is increasing in m It follows thatif v is largemdashso that it is particularly valuable to M to raise capi-talmdashan increase in m unambiguously raises Mrsquos payoff

Notice that if Methm MethmTHORNTHORN is strictly increasing in m it is

optimal for M to make equity offers to all aware investors(methnTHORN frac14 n) Furthermore Mrsquos expected payoff (MethnTHORN) will bestrictly increasing in n Lemma 2 summarizes11

LEMMA 2

(i) MethnTHORN is weakly increasing in n(ii) There exists v such that whenever v gt v

(a) methnTHORN frac14 n(b) MethnTHORN is strictly increasing in n

11 We can show that when v is small there are in fact cases where not allaware investors receive equity offers (methnTHORN lt n)

QUARTERLY JOURNAL OF ECONOMICS1862

Now consider time 2 Let us denote by GethdM eMTHORN the distri-bution from which n the number of aware investors is drawnwhen M exerts effort eM and has connections dM Mrsquos expectedpayoff when he exerts effort eM is Efrac12MethnTHORNjn GethdM eMTHORN

cetheMTHORN beth2THORN M will choose the level of effort eMethdMTHORN that maxi-mizes this expression We can write Mrsquos resulting payoff asVethdMTHORN beth2THORN

Lemma 3 the formal proof of which is given in the OnlineAppendix follows almost immediately from Lemma 2 and fromthe observation that GethdM eMTHORN is increasingmdashin a first-order sto-chastic dominance sensemdashin both dM and eM

LEMMA 3

(i) VethdMTHORN is weakly increasing in dM(ii) Provided v gt v

(a) VethdMTHORN is strictly increasing in dM(b) eMethdMTHORN gt 0 whenever dM gt 0

Finally let us turn back to time 1 Observe that the value ofasset A to manager i is VethdiTHORN Consequently manager i willbid bi frac14 VethdiTHORN in the auction This completes the proof ofProposition 1

Distributions of K and R We showed as part of the proof ofProposition 1 that K = m with probability 1 when gt K = 0with probability 1 when lt Consequently

K frac14 methnTHORN 1fgtethnTHORNg almost surelyeth1THORN

where ethnTHORN frac14 1Methm

ethnTHORNTHORN v methnTHORNthorn12

We can also write R as

follows

R frac14 thorn v K

frac14 thorn v methnTHORN 1fgtethnTHORNg almost surelyeth2THORN

Observe that equations (1) and (2) express K and R as func-tions of and n and n are independent random variables dis-tributed Neth 2THORN and GethdM e

ethdMTHORNTHORN respectively Hence fromequations (1) and (2) we can derive the distributions of K and R(for more details see the Online Appendix) Figure I plots thesedistributions for a particular numerical example

MOVERS AND SHAKERS 1863

IID Endogenizing the Network

Thus far we have taken the network g between agents asexogenous We can endogenize the network by adding an initialperiod to the game Assume there are initially no connectionsbetween agents In period 0 each investor chooses one managerto whom he will link Proposition 2 characterizes the equilibria ofthis game The proof is given in the Online Appendix

PROPOSITION 2 Suppose there are at least three investors(cardethNITHORN 3) and the returns to moving and shaking arelarge (v gt v) All equilibria have the following propertiesand moreover such equilibria exist

(i) In period 0 all investors link to one particular manager YY can be any manager

(ii) Subsequently Y wins the auction (Y = M) and exerts pos-itive effort (eY gt 0)

(iii) Y receives a higher expected payoff than othermanagers

According to Proposition 2 even though managers are iden-tical ex ante one emerges as most connected in equilibrium Infact all investors link to the same manager This manager con-sequently wins the auction moves and shakes the project andearns a higher payoff than his peers

(a) (b)

FIGURE I

Distributions of K and R for a Numerical Example

The parametric assumptions are as follows = 1 = 1 v = 10cetheTHORN frac14 eth10eTHORN2 and the auction winner is directly connected to 10 investors andhas no indirect connections (dM frac14 eth10 0 0 THORN) Note that the distribution of Kis discrete while the distribution of R is continuous

QUARTERLY JOURNAL OF ECONOMICS1864

Although the proof is left for the Online Appendix the intui-tion is as follows Investors strictly prefer to link to the most con-nected manager They prefer to do so because the most connectedmanager wins the auction unless an investor links to the auctionwinner he has no opportunity to invest in the project Since inves-tors strictly prefer to link to the most connected manager all in-vestors end up linking to the same manager in equilibrium

Note that Proposition 2 assumes v gt v because it ensures theauction winner exerts positive effort (eM gt 0) If the auctionwinner exerts zero effort (eM = 0) investors are indifferent overwhom to link to because whoever they choose to link to there iszero chance of having an opportunity to invest in the project

III Extensions

We can extend the baseline model by making managers het-erogeneous along several dimensions (i) their skill at running theproject (ii) their talent at communicating with investors and (iii)how much capital they have

Taking the social network as exogenous we find that thesecharacteristics affect how much managers value the project andwhich one of them becomes the mover and shaker When weendogenize the network we find that these characteristics arealso predictive of who emerges as most connected

1 Skill at Running the Project In the baseline model man-agers were equally skilled at running the project We now assumethat if manager i runs the project it yields a return R frac14 thorn v K thorn i where i denotes the skill of manager i We assumei 012

2 Ability to Communicate Managers had the same ability tocommunicate in the baseline model (ie the same ability to raiseawareness of the project among social connections) We now

12 In some instances a manager may be able to contract with another party tocompensate for lack of skill To give a concrete example a manager might be able tohire a consultant Our definition of skill concerns those aspects for which it is notpossible to compensate

MOVERS AND SHAKERS 1865

assume the cost of effort for manager i is cethei

iTHORN with i gt 0 One can

think of i as manager irsquos ability to communicate with investors

3 Seed Money Managers had no capital of their own in thebaseline model We now assume manager i has an amount ki 0The auction winner M can use his capital as lsquolsquoseed moneyrsquorsquo for theproject Specifically at time 2 before investors decide whether tocontribute capital M chooses sM kM the amount of capital hewill put into the project The auction winner receives a payoffeth1 M

Pj2S ajTHORNR sM cetheM

MTHORN beth2THORN where K frac14 sM thorn

Pj2S aj

Managers who do not win the auction receive a payoff of 0

IIIA Exogenous Network

When we take the network g between agents as exogenouswe obtain the following analog of Proposition 1

PROPOSITION 3 In equilibrium

(i) Managers bid their valuations of asset A in the auctionbi = Vi

(ii) Manager irsquos valuation of asset A is a function of his socialconnections skill at running the project communicationability and capital Vi frac14 Vethdi i i kiTHORN

(iii) Vethdi i i kiTHORN is weakly increasing in di i and ki andstrictly increasing in i

(iv) There exists v such that whenever v gt v(a) Vethdi i i kiTHORN is strictly increasing in di i and ki and

strictly increasing in i provided di gt 0(b) Provided the manager who wins the auction has some social

connections (dM gt 0) he exerts positive effort (eM gt 0)(c) The auction winner uses his capital to seed the project

(sM = kM)

According to Proposition 3 the auction winner will be themanager who values the project most As in the baseline modelmanagers value the project more when they are more connectedManagers also value the project more when they are more skilledat running the project when they are more able communicatorsand when they have more capital

Additionally Proposition 3 says that provided the returns tomoving and shaking are large (v gt v) the auction winner uses hiscapital to seed the project (sM = kM) Furthermore managersrsquo

QUARTERLY JOURNAL OF ECONOMICS1866

valuations of the project are strictly increasing in the amount ofseed capital (ki) they have

The formal proof is left for the Online Appendix but the logicis as follows Managers value the project more when they havemore seed capital because seeding is worthwhile for two reasonsFirst it directly contributes an amount si to the project Secondand more important seeding indirectly contributes to the projectby increasing investorsrsquo willingness to provide capital

IIIB Endogenous Network

We can endogenize the network g in the same manner as inSection IID by assuming there are initially no connectionsbetween agents and that each investor in period 0 chooses onemanager to whom he will link Proposition 4 characterizes theequilibria of this game

PROPOSITION 4 Suppose there are at least three investors(cardethNITHORN 3) and the returns to moving and shaking arelarge (v gt v)

(i) All equilibria have the following properties and moreoversuch equilibria exist

(a) In period 0 all investors link to one particular manager Y(b) Subsequently Y wins the auction (Y = M) exerts positive

effort (eY gt 0) and uses his capital to seed the project(sY = kY)

(c) Y receives a higher expected payoff than other managers

(ii) An equilibrium does not exist in which manager i = Y ifethi i kiTHORN is small Specifically an equilibrium does notexist if Vethdmax i i kiTHORN lt maxj2NM

Veth0 j j kjTHORN wheredmax denotes the case where a manager is directly con-nected to all investors

(iii) An equilibrium exists in which manager i = Y if ethi i kiTHORN islarge Specifically an equilibrium exists if Vethdmax d ii kiTHORN gt maxj2NM

Vethd j j kjTHORN where d frac14 eth1 0 0 THORNdenotes the case where a manager has one direct connectionand no indirect connections

Proposition 4 closely mirrors Proposition 2 Once again wefind that all investors link to one particular manager Y Y subse-quently wins the auction exerts effort to move and shake theproject and earns a higher expected payoff than his peers

MOVERS AND SHAKERS 1867

However in Proposition 2 any manager could emerge as mostconnected and as the projectrsquos mover and shaker In this case wefind that a manager must be sufficiently able and have sufficientcapital to do so (that is ethi i kiTHORN must be sufficiently large)

Specifically an equilibrium does not exist in which manageri = Y if

Vethdmax i i siTHORN lt maxj2NM

Veth0 j j sjTHORN

where dmax denotes the case where a manager is directly con-nected to all investors In this case even if manager i is sociallyconnected (di frac14 dmax) and his peers are not he will be outbid inthe auction Since investors have a preference to link to theeventual auction winner manager i cannot be socially con-nected in equilibrium13

Proposition 4 rules out manager i becoming mover andshaker if ethi i kiTHORN is sufficiently low However manager i canpotentially become mover and shaker even if he is less skilledat running the project than some other manager j has lowercommunication ability and has less capital Furthermore if man-ager i emerges as mover and shaker rather than j he receives astrictly higher expected payoff

Movers and shakers are good from an efficiency point ofviewmdashin the sense that there would be no investment withoutthe mover and shakerrsquos effort but the outcome will be more or lessefficient depending on which manager emerges as mover andshaker Intuitively investors may coordinate on a manager whois more or less suited to run the project

IV Conclusion

We have analyzed a model with two types of agentsmdashman-agers and investorsmdashand an investment project whose return isa function of its underlying quality and aggregate investmentManagers and investors form social connections Managersthen bid to buy control of the project and the winning bidder

13 Note that if investors are more willing to link to some managers thanothers this would also affect who can emerge as mover and shaker We couldmodel this by assuming a cost to investors li of linking to manager i A high linkingcost does not directly affect a managerrsquos valuation of asset A but it could indirectlyaffect it because it might prevent investors from connecting to him

QUARTERLY JOURNAL OF ECONOMICS1868

puts effort into making investors aware of it Finally a subset ofaware investors are given the chance to invest and they decidewhether to do so after receiving private signals of the projectrsquosquality

We first analyze the model taking the social network as exo-genous Connections increase a managerrsquos ability to raise capitalConsequently the most connected manager wins the auctionexerts effort to move and shake the project and provided he isstrictly most connected earns a positive rent When we endogen-ize the network we find that all investors link to one particularmanager Therefore even though all managers are ex ante iden-tical one emerges as most connected in equilibrium becomes theprojectrsquos mover and shaker and receives a higher expected payoffthan his peers

We also extend our baseline model by making managers het-erogeneous along several dimensions (i) their skill at running theproject (ii) their talent at communicating with investors and (iii)how much capital they have These characteristics affect howmuch managers value the project Consequently when we takethe network as exogenous they affect who emerges as the moverand shaker When we endogenize the network these character-istics are also predictive of who emerges as most connected

There are a number of implications of our theory and poten-tial avenues for future work We briefly sketch five

First one notable feature of our model is that rents earned bymanagers do not correspond to their lsquolsquomarginal productrsquorsquomdashat leastnot in the conventional usage of that term In our setting rentsare derived from social position The mover and shaker is sociallyuseful to be sure but can derive lsquolsquooutsizersquorsquo rewards Furthermorethe model suggests that it is easy to misattribute a mover andshakerrsquos success to his skill at running the project In fact amover and shaker may succeed in spite ofmdashrather than becauseofmdashhis skill The broad debate about rising inequality (seePiketty 2014 for a notable recent contribution) has focused to alarge degree on returns to capital versus labor but relativelylittle on what might be called lsquolsquoreturns to social positionrsquorsquo Ourtheory differs from existing accounts of the drivers of inequalitybecause technological factors play a secondary role Empiricaltests of the relative importance of network position versus mar-ginal product may be informed by the structure of our model

Second our model suggests that having capital to seed pro-jects can be valuable This raises the possibility that in the

MOVERS AND SHAKERS 1869

absence of having such capital oneself one may wish to contractwith a large investor to play such a role In serving as anchorinvestors for projects they may earn higher rates of returnthan do small investors In other words such investors mayreceive compensation not just for the capital they personally pro-vide to projects but also for the additional capital their invest-ments help attract14 To give an example when Blackstone wasraising its first private equity fund its cofounders SteveSchwarzman and Pete Peterson found it enormously challengingto raise money15 Prudential became an anchor investor puttingin $100 million and extracted very positive terms According toCarey and Morris (2010)

Prudential insisted that Blackstone not collect a dimeof the profits until Prudential and other investors hadearned a 9 percent compounded annual return onevery dollar theyrsquod pledged to the fund Prudentialalso insisted that Blackstone pay investors in thefund 25 percent on the net revenue from its MampAadvisor work even on deals not connected to thefund In the end these were small prices to payfor the credibility the Prursquos backing would giveBlackstone

Third political campaigns have many of the features of ourmodel They are lsquolsquoprojectsrsquorsquo people make contributions (financialand nonfinancial) and there are strong complementarities

14 We should mention that there is an existing literature on anchor stores Forinstance Gould Pashigian and Prendergast (2005) demonstrate empirically thatshopping mall store contracts are written to take account of the positive externalitythat lsquolsquonational brandrsquorsquo stores generate in driving traffic to smaller stores Bernsteinand Winter (2012) derive the structure of the optimal contract in the presence ofheterogeneous externalities Our theory adapted to such a setting suggests thatanchor stores may receive preferable terms but for rather different reasons thangiven in this strand of literature which typically assumes that only the anchor storeimposes (positive) externalities on other stores By contrast our model (as appliedto stores) involves all stores imposing externalities on one another these extern-alities being proportional to size The argument in say Gould Pashigian andPrendergast (2005) or Bernstein and Winter (2012) as to why there should be abetter rental rate for a large store does not apply in our environment Our theorynonetheless suggests that anchor stores might obtain abetter rate the reason beingthat their participation helps to secure other storesrsquo participation

15 The Blackstone Group now has around $30 billion in funds under manage-ment and more than 1500 employees

QUARTERLY JOURNAL OF ECONOMICS1870

Moreover beliefs about what others will do seem to matter a lotDonors often worry about what other donors are contributingand it is common wisdom that voters typically like to vote forwinning candidates The strong momentum effects in for exam-ple US presidential primaries (see Knight and Schiff 2010 forpersuasive empirical evidence) may be explained in part by con-siderations present in our theory

Fourth there is a burgeoning literature on lsquolsquopersistent perfor-mance differencesrsquorsquo in organizations Most models seeking to ratio-nalize differences among otherwise identical organizations involvesome kind of equilibrium theory where ex ante identical organiza-tions end up in different positions ex post For example inChassang (2010) and Ellison and Holden (2014) this wedge isdue to dynamics Our model suggests an alternative explanationfor persistent performance differences that does not involvedynamics In our theory agentsinvestors focus their attention onone particular manager that manager may be more or less skilled

Finally one might be tempted to take a benign view of movingand shaking given the coordinating role of movers and shakers Itis worth remembering that there may be externalities associatedwith the outcomes they effect For instance the heads of organizedcrime syndicates may be movers and shakers so too lobbyists forvarious special interests To draw appropriate welfare conclusionsit is necessary to take these externalities into account

Supplementary Material

An Online Appendix for this article can be found at QJEonline (qjeoxfordjournalsorg)

University of Warwick

UNSW Australia Business School

References

Almeida Heitor Murillo Campello and Michael S Weisbach lsquolsquoThe Cash FlowSensitivity of Cashrsquorsquo Journal of Finance 59 (2004) 1777ndash1804

Alonso Ricardo Wouter Dessein and Niko Matouschek lsquolsquoWhen DoesCoordination Require Centralizationrsquorsquo American Economic Review 98(2008) 145ndash179

Bala Venkatesh and Sanjeev Goyal lsquolsquoA Noncooperative Model of NetworkFormationrsquorsquo Econometrica 5 (2000) 1181ndash1229

Banerjee Abhijit Arun G Chandrasekhar Esther Duflo and MatthewO Jackson lsquolsquoThe Diffusion of Microfinancersquorsquo Science 341 (2013) 363ndash370

MOVERS AND SHAKERS 1871

Baumol William J The Microtheory of Innovative Entrepreneurship (PrincetonNJ Princeton University Press 2010)

Bernstein Shai and Eyal Winter lsquolsquoContracting with HeterogeneousExternalitiesrsquorsquo American Economic Journal Microeconomics 4 (2012)50ndash76

Bertrand Marianne and Antoinette Schoar lsquolsquoThe Role of Family in FamilyFirmsrsquorsquo Journal of Economic Perspectives 20 (2006) 73ndash96

Blanchard Olivier Florencio Lopez de Silanes and Andrei Shleifer lsquolsquoWhat DoFirms Do with Cash Windfallsrsquorsquo Journal of Financial Economics 36 (1994)337ndash360

Bloch Francis and Bhaskar Dutta lsquolsquoCommunication Networks with EndogenousLink Strengthrsquorsquo Games and Economic Behavior 66 (2009) 39ndash56

Bolton Patrick Markus Brunnermeier and Laura Veldkamp lsquolsquoLeadershipCoordination and Mission-Driven Managementrsquorsquo Review of EconomicStudies 80 (2013) 512ndash537

Burt Ronald S lsquolsquoStructural Holes versus Network Closure as Social Capitalrsquorsquo inSocial Capital Theory and Research Nan Li Karen S Cook and RonaldS Burt eds (New York Aldine de Gruyter 2001)

Caballero Ricardo J Eduardo M R A Engel and John C Haltiwanger lsquolsquoPlant-Level Adjustment and Aggregate Investment Dynamicsrsquorsquo Brookings Paperson Economic Activity 1995 (1995) 1ndash54

Caillaud Bernard and Jean Tirole lsquolsquoConsensus Building How to Persuade aGrouprsquorsquo American Economic Review 97 (2007) 1877ndash1900

Calvo-Armengol Antoni Joan de Marti and Andrea Prat lsquolsquoCommunication andInfluencersquorsquo Theoretical Economics 10 (2015) 649ndash690

Carey David and John E Morris King of Capital (New York Crown 2010)Carlsson Hans and Eric van Damme lsquolsquoGlobal Games and Equilibrium Selectionrsquorsquo

Econometrica 61 (1993) 989ndash1013Chassang Sylvain lsquolsquoBuilding Routines Learning Cooperation and the Dynamics

of Incomplete Relational Contractsrsquorsquo American Economic Review 100 (2010)448ndash465

Chevalier Judith A lsquolsquoDo LBO Supermarkets Charge More An EmpiricalAnalysis of the Effects of LBOs on Supermarket Pricingrsquorsquo Journal ofFinance 50 (1995) 1095ndash1112

Chwe Michael Suk-Young Rational Ritual (Oxfordshire UK PrincetonUniversity Press 2001)

Dessein Wouter lsquolsquoAuthority and Communication in Organizationsrsquorsquo Review ofEconomic Studies 69 (2002) 811ndash838

Dessein Wouter Andrea Galeotti and Tano Santos lsquolsquoRational Inattention andOrganizational Focusrsquorsquo working paper 2014

Dessein Wouter and Tano Santos lsquolsquoAdaptive Organizationsrsquorsquo Journal of PoliticalEconomy 114 (2006) 956ndash995

mdashmdashmdash lsquolsquoManagerial Style and Attentionrsquorsquo working paper 2014Dewan Torun and David Myatt lsquolsquoScandal Protection and Recovery in the

Cabinetrsquorsquo American Political Science Review 101 (2007) 63ndash77mdashmdashmdash lsquolsquoThe Qualities of Leadership Direction Communication and

Obfuscationrsquorsquo American Political Science Review 102 (2008) 351ndash368Ellison Glenn and Richard Holden lsquolsquoA Theory of Rule Developmentrsquorsquo Journal of

Law Economics and Organization 30 (2014) 649ndash682Fazzari Steven Glenn Hubbard and Bruce C Petersen lsquolsquoFinancing Constraints

and Corporate Investmentrsquorsquo Brookings Papers on Economic Activity 1988(1988) 141ndash195

Feri Francesco lsquolsquoStochastic Stability in Networks with Decayrsquorsquo Journal ofEconomic Theory 135 (2007) 442ndash457

Galeotti Andrea and Sanjeev Goyal lsquolsquoThe Law of the Fewrsquorsquo American EconomicReview 100 (2010) 1468ndash1492

Galeotti Andrea Sanjeev Goyal and Jurjen Kamphorst lsquolsquoNetwork Formationwith Heterogeneous Playersrsquorsquo Games and Economic Behavior 54 (2006)353ndash372

Gibbons Robert lsquolsquoWhat the Folk Theorem Doesnrsquot Tell Usrsquorsquo Industrial andCorporate Change 15 (2006) 381ndash386

QUARTERLY JOURNAL OF ECONOMICS1872

Gibbons Robert and Rebecca Henderson lsquolsquoWhat Do Managers Dorsquorsquo in TheHandbook of Organizational Economics Robert Gibbons and John Robertseds (Princeton NJ Princeton University Press 2012)

Gould Eric D B Peter Pashigian and Canice J Prendergast lsquolsquoContractsExternalities and Incentives in Shopping Mallsrsquorsquo Review of Economics andStatistics 87 (2005) 411ndash422

Goyal Sanjeev and Fernando Vega-Redondo lsquolsquoStructural Holes in SocialNetworksrsquorsquo Journal of Economic Theory 137 (2007) 460ndash492

Hayashi Fumio lsquolsquoTobinrsquos Marginal q and Average q A NeoclassicalInterpretationrsquorsquo Econometrica 50 (1982) 213ndash224

Hellwig Christian and Laura Veldkamp lsquolsquoKnowing What Others KnowCoordination Motives in Information Acquisitionrsquorsquo Review of EconomicStudies 76 (2009) 223ndash251

Hermalin Benjamin E lsquolsquoToward an Economic Theory of Leadership Leading byExamplersquorsquo American Economic Review 88 (1998) 1188ndash1206

Herskovic Bernard and Ramos Joao lsquolsquoAcquiring Information through Peersrsquorsquoworking paper 2015

Hochberg Yael Alexander Ljungqvist and Yang Lu lsquolsquoWhom You Know MattersVenture Capital Networks and Investment Performancersquorsquo Journal ofFinance 62 (2007) 251ndash301

Hojman Daniel and Adam Szeidl lsquolsquoCore and Periphery in Networksrsquorsquo Journal ofEconomic Theory 139 (2007) 295ndash309

Hoshi Takeo Anil Kashyap and David Scharfstein lsquolsquoCorporate StructureLiquidity and Investment Evidence from Japanese Industrial GroupsrsquorsquoQuarterly Journal of Economics 106 (1991) 33ndash60

Jackson Matthew O and Asher Wolinksy lsquolsquoA Strategic Model of Social andEconomic Networksrsquorsquo Journal of Economic Theory 71 (1996) 44ndash74

Kaplan Steven N and Antoinette Schoar lsquolsquoPrivate Equity PerformanceReturns Persistence and Capital Flowsrsquorsquo Journal of Finance 60 (2005)1791ndash1823

Kaplan Steven N and Luigi Zingales lsquolsquoDo Investment-Cash Flow SensitivitiesProvide Useful Measures of Financing Constraintsrsquorsquo Quarterly Journal ofEconomics 112 (1997) 169ndash215

Kashyap Anil K Owen A Lamont and Jeremy C Stein lsquolsquoCredit Conditions andthe Cyclical Behavior of Inventoriesrsquorsquo Quarterly Journal of Economics 109(1994) 565ndash592

Knight Brian and Nathan Schiff lsquolsquoMomentum and Social Learning inPresidential Primariesrsquorsquo Journal of Political Economy 118 (2010) 1110ndash1150

Knight Frank H Risk Uncertainty and Profit (New York Hart Schaffner andMarx 1921)

Lamont Owen A lsquolsquoCash Flows and Investment Evidence from Internal CapitalMarketsrsquorsquo Journal of Finance 51 (1997) 83ndash109

Lucas Robert E lsquolsquoAdjustment Costs and the Theory of Supplyrsquorsquo Journal ofPolitical Economy 75 (1967) 321ndash334

Lucas Robert E and Edward C Prescott lsquolsquoInvestment under UncertaintyrsquorsquoEconometrica 39 (1971) 659ndash681

Majumdar Sumon and Sharun W Mukand lsquolsquoPolicy Gamblesrsquorsquo AmericanEconomic Review 94 (2004) 1207ndash1222

Miao Jianjun and Pengfei Wang lsquolsquoA Q-Theory Model with Lumpy InvestmentrsquorsquoEconomic Theory 57 (2014) 133ndash159

Morck Randall Andrei Shleifer and Robert W Vishny lsquolsquoManagementOwnership and Market Valuation An Empirical Analysisrsquorsquo Journal ofFinancial Economics 20 (1988) 293ndash315

Morris Stephen and Hyun Song Shin lsquolsquoUnique Equilibrium in a Model of Self-Fulfilling Currency Attacksrsquorsquo American Economic Review 88 (1998) 587ndash597

Peek Joe and Eric Rosengren lsquolsquoThe International Transmission of FinancialShocksrsquorsquo American Economic Review 87 (1997) 495ndash505

Piketty Thomas Capital in the Twenty-First Century (Cambridge MA HarvardUniversity Press 2014)

MOVERS AND SHAKERS 1873

Prendergast Canice and Lars Stole lsquolsquoImpetuous Youngsters and Jaded Old-Timers Acquiring a Reputation for Learningrsquorsquo Journal of PoliticalEconomy 104 (1996) 1105ndash1134

Prescott Edward C lsquolsquoTheory Ahead of Business Cycle Measurementrsquorsquo QuarterlyReview Federal Reserve Bank of Minneapolis 10 (1986) 9ndash22

Rajan Raghuram G and Luigi Zingales lsquolsquoPower in a Theory of the FirmrsquorsquoQuarterly Journal of Economics 113 (1998) 387ndash432

Rantakari Heikki lsquolsquoGoverning Adaptationrsquorsquo Review of Economic Studies 75(2008) 1257ndash1285

Schumpeter Joseph A The Theory of Economic Development An Inquiry intoProfits Capital Credit Interest and the Business Cycle (Cambridge MAHarvard University Press 1934)

Sharpe Steven A lsquolsquoFinancial Market Imperfections Firm Leverage and theCyclicality of Employmentrsquorsquo American Economic Review 84 (1994) 1060ndash1074

Stein Jeremy C lsquolsquoTakeover Threats and Managerial Myopiarsquorsquo Journal ofPolitical Economy 96 (1988) 61ndash80

mdashmdashmdash lsquolsquoEfficient Capital Markets Inefficient Firms A Model of MyopicCorporate Behaviorrsquorsquo Quarterly Journal of Economics 104 (1989) 655ndash669

Uzawa H lsquolsquoTime Preference and the Penrose Effect in a Two-Class Model ofEconomic Growthrsquorsquo Journal of Political Economy 77 (1969) 628ndash652

Zeckendorf William and Edward A McCreary The Autobiography of WilliamZeckendorf With Edward McCreary (New York Holt McDougal 1970)

QUARTERLY JOURNAL OF ECONOMICS1874

Gibbons Robert and Rebecca Henderson lsquolsquoWhat Do Managers Dorsquorsquo in TheHandbook of Organizational Economics Robert Gibbons and John Robertseds (Princeton NJ Princeton University Press 2012)

Gould Eric D B Peter Pashigian and Canice J Prendergast lsquolsquoContractsExternalities and Incentives in Shopping Mallsrsquorsquo Review of Economics andStatistics 87 (2005) 411ndash422

Goyal Sanjeev and Fernando Vega-Redondo lsquolsquoStructural Holes in SocialNetworksrsquorsquo Journal of Economic Theory 137 (2007) 460ndash492

Hayashi Fumio lsquolsquoTobinrsquos Marginal q and Average q A NeoclassicalInterpretationrsquorsquo Econometrica 50 (1982) 213ndash224

Hellwig Christian and Laura Veldkamp lsquolsquoKnowing What Others KnowCoordination Motives in Information Acquisitionrsquorsquo Review of EconomicStudies 76 (2009) 223ndash251

Hermalin Benjamin E lsquolsquoToward an Economic Theory of Leadership Leading byExamplersquorsquo American Economic Review 88 (1998) 1188ndash1206

Herskovic Bernard and Ramos Joao lsquolsquoAcquiring Information through Peersrsquorsquoworking paper 2015

Hochberg Yael Alexander Ljungqvist and Yang Lu lsquolsquoWhom You Know MattersVenture Capital Networks and Investment Performancersquorsquo Journal ofFinance 62 (2007) 251ndash301

Hojman Daniel and Adam Szeidl lsquolsquoCore and Periphery in Networksrsquorsquo Journal ofEconomic Theory 139 (2007) 295ndash309

Hoshi Takeo Anil Kashyap and David Scharfstein lsquolsquoCorporate StructureLiquidity and Investment Evidence from Japanese Industrial GroupsrsquorsquoQuarterly Journal of Economics 106 (1991) 33ndash60

Jackson Matthew O and Asher Wolinksy lsquolsquoA Strategic Model of Social andEconomic Networksrsquorsquo Journal of Economic Theory 71 (1996) 44ndash74

Kaplan Steven N and Antoinette Schoar lsquolsquoPrivate Equity PerformanceReturns Persistence and Capital Flowsrsquorsquo Journal of Finance 60 (2005)1791ndash1823

Kaplan Steven N and Luigi Zingales lsquolsquoDo Investment-Cash Flow SensitivitiesProvide Useful Measures of Financing Constraintsrsquorsquo Quarterly Journal ofEconomics 112 (1997) 169ndash215

Kashyap Anil K Owen A Lamont and Jeremy C Stein lsquolsquoCredit Conditions andthe Cyclical Behavior of Inventoriesrsquorsquo Quarterly Journal of Economics 109(1994) 565ndash592

Knight Brian and Nathan Schiff lsquolsquoMomentum and Social Learning inPresidential Primariesrsquorsquo Journal of Political Economy 118 (2010) 1110ndash1150

Knight Frank H Risk Uncertainty and Profit (New York Hart Schaffner andMarx 1921)

Lamont Owen A lsquolsquoCash Flows and Investment Evidence from Internal CapitalMarketsrsquorsquo Journal of Finance 51 (1997) 83ndash109

Lucas Robert E lsquolsquoAdjustment Costs and the Theory of Supplyrsquorsquo Journal ofPolitical Economy 75 (1967) 321ndash334

Lucas Robert E and Edward C Prescott lsquolsquoInvestment under UncertaintyrsquorsquoEconometrica 39 (1971) 659ndash681

Majumdar Sumon and Sharun W Mukand lsquolsquoPolicy Gamblesrsquorsquo AmericanEconomic Review 94 (2004) 1207ndash1222

Miao Jianjun and Pengfei Wang lsquolsquoA Q-Theory Model with Lumpy InvestmentrsquorsquoEconomic Theory 57 (2014) 133ndash159

Morck Randall Andrei Shleifer and Robert W Vishny lsquolsquoManagementOwnership and Market Valuation An Empirical Analysisrsquorsquo Journal ofFinancial Economics 20 (1988) 293ndash315

Morris Stephen and Hyun Song Shin lsquolsquoUnique Equilibrium in a Model of Self-Fulfilling Currency Attacksrsquorsquo American Economic Review 88 (1998) 587ndash597

Peek Joe and Eric Rosengren lsquolsquoThe International Transmission of FinancialShocksrsquorsquo American Economic Review 87 (1997) 495ndash505

Piketty Thomas Capital in the Twenty-First Century (Cambridge MA HarvardUniversity Press 2014)

MOVERS AND SHAKERS 1873

Prendergast Canice and Lars Stole lsquolsquoImpetuous Youngsters and Jaded Old-Timers Acquiring a Reputation for Learningrsquorsquo Journal of PoliticalEconomy 104 (1996) 1105ndash1134

Prescott Edward C lsquolsquoTheory Ahead of Business Cycle Measurementrsquorsquo QuarterlyReview Federal Reserve Bank of Minneapolis 10 (1986) 9ndash22

Rajan Raghuram G and Luigi Zingales lsquolsquoPower in a Theory of the FirmrsquorsquoQuarterly Journal of Economics 113 (1998) 387ndash432

Rantakari Heikki lsquolsquoGoverning Adaptationrsquorsquo Review of Economic Studies 75(2008) 1257ndash1285

Schumpeter Joseph A The Theory of Economic Development An Inquiry intoProfits Capital Credit Interest and the Business Cycle (Cambridge MAHarvard University Press 1934)

Sharpe Steven A lsquolsquoFinancial Market Imperfections Firm Leverage and theCyclicality of Employmentrsquorsquo American Economic Review 84 (1994) 1060ndash1074

Stein Jeremy C lsquolsquoTakeover Threats and Managerial Myopiarsquorsquo Journal ofPolitical Economy 96 (1988) 61ndash80

mdashmdashmdash lsquolsquoEfficient Capital Markets Inefficient Firms A Model of MyopicCorporate Behaviorrsquorsquo Quarterly Journal of Economics 104 (1989) 655ndash669

Uzawa H lsquolsquoTime Preference and the Penrose Effect in a Two-Class Model ofEconomic Growthrsquorsquo Journal of Political Economy 77 (1969) 628ndash652

Zeckendorf William and Edward A McCreary The Autobiography of WilliamZeckendorf With Edward McCreary (New York Holt McDougal 1970)

QUARTERLY JOURNAL OF ECONOMICS1874

Prendergast Canice and Lars Stole lsquolsquoImpetuous Youngsters and Jaded Old-Timers Acquiring a Reputation for Learningrsquorsquo Journal of PoliticalEconomy 104 (1996) 1105ndash1134

Prescott Edward C lsquolsquoTheory Ahead of Business Cycle Measurementrsquorsquo QuarterlyReview Federal Reserve Bank of Minneapolis 10 (1986) 9ndash22

Rajan Raghuram G and Luigi Zingales lsquolsquoPower in a Theory of the FirmrsquorsquoQuarterly Journal of Economics 113 (1998) 387ndash432

Rantakari Heikki lsquolsquoGoverning Adaptationrsquorsquo Review of Economic Studies 75(2008) 1257ndash1285

Schumpeter Joseph A The Theory of Economic Development An Inquiry intoProfits Capital Credit Interest and the Business Cycle (Cambridge MAHarvard University Press 1934)

Sharpe Steven A lsquolsquoFinancial Market Imperfections Firm Leverage and theCyclicality of Employmentrsquorsquo American Economic Review 84 (1994) 1060ndash1074

Stein Jeremy C lsquolsquoTakeover Threats and Managerial Myopiarsquorsquo Journal ofPolitical Economy 96 (1988) 61ndash80

mdashmdashmdash lsquolsquoEfficient Capital Markets Inefficient Firms A Model of MyopicCorporate Behaviorrsquorsquo Quarterly Journal of Economics 104 (1989) 655ndash669

Uzawa H lsquolsquoTime Preference and the Penrose Effect in a Two-Class Model ofEconomic Growthrsquorsquo Journal of Political Economy 77 (1969) 628ndash652

Zeckendorf William and Edward A McCreary The Autobiography of WilliamZeckendorf With Edward McCreary (New York Holt McDougal 1970)

QUARTERLY JOURNAL OF ECONOMICS1874