The Roles of Structured Management in the Formation of Transactional Relationships

We empirically examine the roles of structured management in the formation of transactional relationships by using the Japanese version of Management and Organizational Practices Survey and the business-to-business transaction data from Teikoku Databank. Our unique approach is to use separate measures of productivity and managerial efficiency in this examination. Our main findings are summarized as follows: First, management scores (a proxy for managerial efficiency) are positively associated with a range of transactional partners even after a level of productivity is controlled for. Second, our estimation using an exogenous event caused by the Great East Japan earthquake appears to suggest that causality is at play in this relationship. Third, firms with higher management scores add and drop transactional partners more frequently than firms with lower management scores. Fourth, firms with higher management scores transact with larger firms. Finally, management scores are positively correlated with TFP, and negatively correlated with a measure of uncertainty. Further, the negative effect of uncertainty on the formation of transactional relationships is mitigated by managerial efficiency. Overall, the empirical results of this paper suggest that both production and managerial efficiency are important factors in facilitating the formation of transactional relationships.