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Anatomy of a Paradox: Management Practices, Organisational Structure and Energy Efficiency

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  • Ralf Martin
  • Mirabelle Muûls
  • Ulrich J. Wagner
  • Laure B. de Preux

Abstract

This paper presents new evidence on managerial and organizational factors that explain firm level energy efficiency and TFP. We interviewed managers of 190 randomly selected manufacturing plants in the UK and matched their responses with official business microdata. We find that 'climate friendly' management practices are associated with lower energy intensity and higher TFP. Firms that adopt more such practices also engage in more R&D related to climate change. We show that the variation in management practices across firms can be explained in part by organizational structure. Firms are more likely to adopt climate friendly management practices if climate change issues are managed by the environmental or energy manager, and if this manager is close to the CEO. Our results support the view that the "energy efficiency paradox" can be explained by managerial factors and highlight their importance for private-sector innovation that will sustain future growth in energy efficiency.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1039.

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Date of creation: Dec 2010
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Handle: RePEc:cep:cepdps:dp1039

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

Keywords: climate policy; energy efficiency; firm behavior; management practices; manufacturing; microdata; organizational structure;

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References

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  1. Stephen J. DeCanio & Catherine Dibble & Keyvan Amir-Atefi, 2000. "The Importance of Organizational Structure for the Adoption of Innovations," Management Science, INFORMS, vol. 46(10), pages 1285-1299, October.
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  3. Gilbert E. Metcalf & Kevin A. Hassett, 1999. "Measuring The Energy Savings From Home Improvement Investments: Evidence From Monthly Billing Data," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 516-528, August.
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  8. DeCanio, Stephen J, 1998. "The efficiency paradox: bureaucratic and organizational barriers to profitable energy-saving investments," Energy Policy, Elsevier, vol. 26(5), pages 441-454, April.
  9. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
  10. Adam B. Jaffe & Karen Palmer, 1996. "Environmental Regulation and Innovation: A Panel Data Study," NBER Working Papers 5545, National Bureau of Economic Research, Inc.
  11. Brunnermeier, Smita B. & Cohen, Mark A., 2003. "Determinants of environmental innovation in US manufacturing industries," Journal of Environmental Economics and Management, Elsevier, vol. 45(2), pages 278-293, March.
  12. Nick Bloom & John Van Reenen, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," NBER Working Papers 12216, National Bureau of Economic Research, Inc.
  13. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
  14. Ronald J. Shadbegian and Wayne B. Gray, 2005. "Assessing Multi-Dimensional Performance: Environmental and Economic Outcomes," NCEE Working Paper Series 200505, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Jun 2005.
  15. Stephen J. Decanio & William E. Watkins, 1998. "Investment In Energy Efficiency: Do The Characteristics Of Firms Matter?," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 95-107, February.
  16. Hassett, Kevin A. & Metcalf, Gilbert E., 1993. "Energy conservation investment : Do consumers discount the future correctly?," Energy Policy, Elsevier, vol. 21(6), pages 710-716, June.
  17. Bewley, Truman, 2002. "Interviews as a valid empirical tool in economics," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 31(4), pages 343-353.
  18. Jaffe, Adam B. & Stavins, Robert N., 1994. "The energy-efficiency gap What does it mean?," Energy Policy, Elsevier, vol. 22(10), pages 804-810, October.
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Citations

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Cited by:
  1. Ralf Martin & Mirabelle Muûls & Ulrich J. Wagner & Laure B. de Preux, 2012. "Industry Compensation Under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme," CEP Discussion Papers dp1150, Centre for Economic Performance, LSE.
  2. Barry Anderson & Jörg Leib & Ralf Martin & Marty McGuigan & Mirabelle Muuls & Laure de Preux & Ulrich J. Wagner, 2011. "Climate change policy and business in Europe: evidence from interviewing managers," LSE Research Online Documents on Economics 47493, London School of Economics and Political Science, LSE Library.
  3. Hottenrott, Hanna & Rexhäuser, Sascha & Veugelers, Reinhilde, 2012. "Green innovations and organisational change: making better use of environmental technology," CEPR Discussion Papers 9055, C.E.P.R. Discussion Papers.
  4. Trianni, Andrea & Cagno, Enrico & Worrell, Ernst, 2013. "Innovation and adoption of energy efficient technologies: An exploratory analysis of Italian primary metal manufacturing SMEs," Energy Policy, Elsevier, vol. 61(C), pages 430-440.
  5. Sam Fankhauser & Alex Bowen & Raphael Calel & Antoine Dechezleprêtre & David Grover & James Rydge & Misato Sato, 2012. "Who will win the green race? In search of environmental competitiveness and innovation," Grantham Research Institute on Climate Change and the Environment Working Papers 94, Grantham Research Institute on Climate Change and the Environment.
  6. Bagayev, Igor & Najman, Boris, 2014. "Money to fill the gap? Local financial development and energy intensity in Europe and Central Asia," MPRA Paper 55193, University Library of Munich, Germany.
  7. Simone Borghesi & Giulio Cainelli & Massimiliano Mazzanti, 2012. "Brown Sunsets and Green Dawns in the Industrial Sector: Environmental Innovations, Firm Behavior and the European Emission Trading," Working Papers 2012.03, Fondazione Eni Enrico Mattei.
  8. Sascha Rexhäuser & Christian Rammer, 2014. "Environmental Innovations and Firm Profitability: Unmasking the Porter Hypothesis," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 57(1), pages 145-167, January.
  9. Bagayev, Igor & Najman, Boris, 2013. "Less quality more costs: Does local power sector reliability matter for electricity intensity?," MPRA Paper 46943, University Library of Munich, Germany.

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