| Why are some firms more productive than others? While the industrial economic literature describes factors at market and organizational levels (Bloom and Van Reenen 2007; Ployhart and Moliterno 2011; Syverson 2011), the HR literature increasingly acknowledges the role of work engagement for individual and group performance (Harter et al. 2002; Rich et al. 2010; Saks 2006; Xanthopoulou et al. 2009). A meta-study conducted by Harter et al. (2013) reports positive correlations between-firm performance and constructs of work engagement. However, it remains unclear how individual perspective interacts with the firm level, and if the positive relationship holds once the firm-specific setting and the wider context are taken into account. Particularly in challenging business climates, which are often signified by high levels of corruption and other regional constraints, it is questionable whether the psychological make-up of individual managers will still have an impact on the competitiveness of individual firms. The main objective of this paper is to provide systemic evidence of how a manager’s work engagement can positively affect firm performance, and to investigate the role of organizational and regional factors in that relationship. Our focus lies on Bangladesh, as a business environment marked by high growth but also by high levels of corruption (World Bank 2008). Theoretically, we draw on the resource-based view of the firm (Barney 1991; Barney et al. 2001, 2011; Bhatnagar and Biswas 2010) and the managerial rents model (Castanias and Helfat 1991, 2001) to argue that the work engagement of the manager (Christian et al. 2011; Kahn 1990) is a specific resource that matters for firm performance. Thus, we offer a novel way to bring together two strands of the literature. On the one hand, microeconomic literature discusses factors at the market and firm levels that shape firm performance (Bloom and Van Reenen 2007; Ployhart and Moliterno 2011; Syverson 2011). On the other hand, industrial and organizational psychologists take a different perspective, and typically stress employees’ knowledge, skills, and abilities as key factors (Crook et al. 2011), which links to the growing literature about managerial characteristics and firm performance (Bertrand and Schoar 2003; Lin and Wu 2014). This study acknowledges that both firm-level factors and individual attributes drive firm performance. In addition, we connect managerial attitudes with firm-level resources, and investigate the influences of regional- and industry-context variables commonly found in developing economies. The contribution of this paper to the literature is threefold. We offer evidence on the contribution of managerial work engagement to firm performance. By exploring how work engagement is influenced by firm-level factors, we contribute to the growing field of studies that connect managerial capabilities with performance differences between firms (e.g., Kor and Mesko 2013). We introduce a psychological variable, managerial work engagement, which is in part an individual resource and partly context dependent, and has been related to individual and group performance (Christian et al. 2011; Karatepe 2013; Ma¨kikangas et al. 2016; Salanova et al. 2005; Rich et al. 2010). Theoretically, we conceive managerial work engagement as a firm-capital variable, and investigate its effect on between-firm performance. |