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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

Abstract

We use an innovative methodology to measure management practices in over 300 manufacturing firms in the UK. We then match this management data to production and energy usage information for establishments owned by these firms. We find that establishments in better managed firms are significantly less energy intensive. They use less energy per unit of output, and also in relation to other factor inputs. This is quantitatively substantial: going from the 25th to the 75th percentile of management practices is associated with a 17.4% reduction in energy intensity. This negative relationship 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 that well managed firms are adopting modern lean manufacturing practices, which allows them to increase productivity by using energy more efficiently. This suggests that improving the management practices of manufacturing firms may help to reduce greenhouse gas emissions.

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File URL: http://eprints.lse.ac.uk/28505/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 28505.

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Length: 38 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:ehl:lserod:28505

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Web page: http://www.lse.ac.uk/
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Related research

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

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References

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  1. Bertrand, Marianne & Schoar, Antoinette, 2003. "Managing With Style: The Effect of Managers on Firm Policies," Working papers 4280-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  2. Nick Bloom & Stephen Dorgan & John Dowdy & Tom Rippin & John Van Reenen, 2005. "Management Practices Across Firms and Nations," CEP Special Papers 17, Centre for Economic Performance, LSE.
  3. Ann Bartel & Casey Ichniowski & Kathryn Shaw, 2007. "How Does Information Technology Affect Productivity? Plant-Level Comparisons of Product Innovation, Process Improvement, and Worker Skills," The Quarterly Journal of Economics, MIT Press, vol. 122(4), pages 1721-1758, November.
  4. 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.
  5. S Black & L Lynch, 1997. "How to Compete: The Impact of Workplace Practices and Information Technology on Productivity," CEP Discussion Papers dp0376, Centre for Economic Performance, LSE.
  6. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
  7. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  8. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," Harvard Institute of Economic Research Working Papers 1719, Harvard - Institute of Economic Research.
  9. Nick Bloom & John Van Reenen, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," CEP Discussion Papers dp0716, Centre for Economic Performance, LSE.
  10. Michael Greenstone, 1998. "The Impacts of Environmental Regulations on Industrial Activity: Evidence from the 1970 and 1977 Clean Air Act Amendments and the Census of Manufacturers," Working Papers 787, Princeton University, Department of Economics, Industrial Relations Section..
  11. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
  12. Ronald J. Shadbegian & Wayne B. Gray, 2003. "Pollution Abatement Expenditures and Plant-Level Productivity: A Production Function Approach," NCEE Working Paper Series 200305, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Aug 2003.
  13. David Neumark & Peter Cappelli, 1999. "Do "High Performance" Work Practices Improve Establishment-Level Outcomes?," NBER Working Papers 7374, National Bureau of Economic Research, Inc.
  14. Eli Berman & Linda T.M. Bui, 1998. "Environmental Regulation and Productivity: Evidence from Oil Refineries," Papers 0091, Boston University - Industry Studies Programme.
  15. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  16. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
  17. 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.
  18. 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.
  19. Griffith, Rachel, 1999. "Using the ARD Establishment Level Data to Look at Foreign Ownership and Productivity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 109(456), pages F416-42, June.
  20. Ralf Martin, 2005. "Productivity Dispersion, Competition and Productivity Measurement," CEP Discussion Papers dp0692, Centre for Economic Performance, LSE.
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