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Why Do Management Practices Differ across Firms and Countries?

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  • Nicholas Bloom
  • John Van Reenen

Abstract

Economists have long puzzled over the astounding differences in productivity between firms and countries. In this paper, we present evidence on a possible explanation for persistent differences in productivity at the firm and the national level -- namely, that such differences largely reflect variations in management practices. We have, over the last decade, undertaken a large survey research program to systematically measure management practices across firms, industries, and countries. Our survey approach focuses on aspects of management like systematic performance monitoring, setting appropriate targets, and providing incentives for good performance. We explain how we measure management; identify some basic patterns in our data; then turn to the question of why management practices vary so much across firms and nations. What we find is a combination of imperfectly competitive markets, family ownership of firms, regulations restricting management practices, and informational barriers allow bad management to persist.

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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 24 (2010)
Issue (Month): 1 (Winter)
Pages: 203-24

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Handle: RePEc:aea:jecper:v:24:y:2010:i:1:p:203-24

Note: DOI: 10.1257/jep.24.1.203
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  1. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and measuring organization capital," Staff Report, Federal Reserve Bank of Minneapolis 291, Federal Reserve Bank of Minneapolis.
  2. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," NBER Working Papers 10501, National Bureau of Economic Research, Inc.
  3. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(1), pages 83-116, February.
  4. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999. "Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence," NBER Working Papers 7136, National Bureau of Economic Research, Inc.
  5. Zvi Griliches, 1995. "The Discovery of the Residual: A Historic Note," Harvard Institute of Economic Research Working Papers 1742, Harvard - Institute of Economic Research.
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  8. Lucia Foster & John Haltiwanger & Chad Syverson, 2008. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," American Economic Review, American Economic Association, American Economic Association, vol. 98(1), pages 394-425, March.
  9. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  10. Charles I. Jones & Paul M. Romer, 2010. "The New Kaldor Facts: Ideas, Institutions, Population, and Human Capital," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 224-45, January.
  11. Bloom, Nicholas & Sadun, Raffaella & Van Reenen, John, 2007. "Americans Do I.T. Better: US Multinationals and the Productivity Miracle," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6291, C.E.P.R. Discussion Papers.
  12. Nick Bloom & John Van Reenen, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," CEP Discussion Papers dp0716, Centre for Economic Performance, LSE.
  13. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, Econometric Society, vol. 60(5), pages 1127-50, September.
  14. Chad Syverson, 2004. "Product Substitutability and Productivity Dispersion," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 534-550, May.
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  16. Zvi Griliches, 1995. "The Discovery of the Residual: An Historical Note," NBER Working Papers 5348, National Bureau of Economic Research, Inc.
  17. Nick Bloom & Christos Genakos & Ralf Martin & Raffaella Sadun, 2008. "Modern Management: Good for the Environment or Just Hot Air?," CEP Discussion Papers dp0891, Centre for Economic Performance, LSE.
  18. Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Books, National Bureau of Economic Research, Inc, number abra56-1, October.
  19. Ariel T. Burstein & Alexander Monge-Naranjo, 2009. "Foreign Know-How, Firm Control, and the Income of Developing Countries-super-," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 124(1), pages 149-195, February.
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