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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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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.24.1.203
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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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References

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  1. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," NBER Working Papers 10501, National Bureau of Economic Research, Inc.
  2. Nick Bloom & Christos Genakos & Ralf Martin & Raffaella Sadun, 2008. "Modern management: good for the environment or just hot air?," LSE Research Online Documents on Economics 28505, London School of Economics and Political Science, LSE Library.
  3. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Misallocation and Manufacturing TFP in China and India," Discussion Papers 07-006, Stanford Institute for Economic Policy Research.
  4. Foster, Lucia & Haltiwanger, John C. & Syverson, Chad, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," IZA Discussion Papers 1705, Institute for the Study of Labor (IZA).
  5. Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Books, National Bureau of Economic Research, Inc, number abra56-1, octubre-d.
  6. Zvi Griliches, 1995. "The Discovery of the Residual: A Historic Note," Harvard Institute of Economic Research Working Papers 1742, Harvard - Institute of Economic Research.
  7. 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.
  8. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, And The Demand For Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 339-376, February.
  9. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2007. "Americans Do I.T. Better: US Multinationals and the Productivity Miracle," NBER Working Papers 13085, National Bureau of Economic Research, Inc.
  10. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
  11. Zvi Griliches, 1995. "The Discovery of the Residual: An Historical Note," NBER Working Papers 5348, National Bureau of Economic Research, Inc.
  12. Nicholas Bloom & John Van Reenen, 2007. "Measuring and Explaining Management Practices Across Firms and Countries," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1351-1408, November.
  13. Chad Syverson, 2004. "Product Substitutability and Productivity Dispersion," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 534-550, May.
  14. 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, vol. 114(1), pages 83-116, February.
  15. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and measuring organization capital," Staff Report 291, Federal Reserve Bank of Minneapolis.
  16. Moses Abramovitz, 1956. "Resource and Output Trends in the United States Since 1870," NBER Chapters, in: Resource and Output Trends in the United States Since 1870, pages 1-23 National Bureau of Economic Research, Inc.
  17. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  18. 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, vol. 124(1), pages 149-195, February.
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