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Modern Management: Good for the Environment or Just Hot Air?

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Author Info
Nick Bloom
Christos Genakos
Ralf Martin
Raffaella Sadun

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Abstract

We use an innovative methodology to measure management practices in over 300 manufacturingfirms in the UK. We then match this management data to production and energy usage information forestablishments owned by these firms. We find that establishments in better managed firms aresignificantly less energy intensive. They use less energy per unit of output, and also in relation toother factor inputs. This is quantitatively substantial: going from the 25th to the 75th percentile ofmanagement practices is associated with a 17.4% reduction in energy intensity. This negativerelationship is robust to a variety of controls for industry, location, technology and other factor inputs.Better managed firms are also significantly more productive. One interpretation of these results is thatwell managed firms are adopting modern lean manufacturing practices, which allows them to increaseproductivity by using energy more efficiently. This suggests that improving the management practicesof manufacturing firms may help to reduce greenhouse gas emissions.

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Publisher Info
Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0891.

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Date of creation: Oct 2008
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Handle: RePEc:cep:cepdps:dp0891

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Related research
Keywords: management; energy efficiency; energy intensity and productivity;

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Find related papers by JEL classification:
L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
M2 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics
O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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  1. Bloom, Nicholas & Sadun, Raffaella & Van Reenen, John, 2007. "Americans Do I.T. Better: US Multinationals and the Productivity Miracle," CEPR Discussion Papers 6291, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Shadbegian, Ronald J. & Gray, Wayne B., 2005. "Pollution abatement expenditures and plant-level productivity: A production function approach," Ecological Economics, Elsevier, vol. 54(2-3), pages 196-208, August. [Downloadable!] (restricted)
    Other versions:
  3. Sandra E. Black & Lisa M. Lynch, 1997. "How to Compete: The Impact of Workplace Practices and Information Technology on Productivity," NBER Working Papers 6120, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," Harvard Institute of Economic Research Working Papers 1719, Harvard - Institute of Economic Research.
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  5. Christensen, Laurits R & Greene, William H, 1976. "Economies of Scale in U.S. Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 655-76, August. [Downloadable!] (restricted)
  6. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09. [Downloadable!] (restricted)
  7. Nick Bloom & John Van Reenen, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," CEP Discussion Papers dp0716, Centre for Economic Performance, LSE. [Downloadable!]
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  8. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Blackwell Publishing, vol. 70(2), pages 317-341, 04. [Downloadable!] (restricted)
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  9. Rachel Griffith, 1999. "Using the ARD establishment level data to look at foreign ownership and productivity in the UK," IFS Working Papers W99/06, Institute for Fiscal Studies.
  10. Eli Berman & Linda T. M. Bui, 2001. "Environmental Regulation And Productivity: Evidence From Oil Refineries," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 498-510, August. [Downloadable!] (restricted)
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  11. Peter Cappelli & David Neumark, 2001. "Do "high-performance" work practices improve establishment-level outcomes?," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 54(4), pages 737-775, July.
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  12. Michael Greenstone, 2002. "The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufactures," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1175-1219, December. [Downloadable!] (restricted)
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