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Why Do Management Practices Differ across Firms and Countries?

  • Nicholas Bloom
  • John Van Reenen

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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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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  1. 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.
  2. Nicholas Bloom & Christos Genakos & Ralf Martin & Raffaella Sadun, 2008. "Modern Management: Good for the Environment of Just Hot Air?," Discussion Papers 08-009, Stanford Institute for Economic Policy Research.
  3. 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.
  4. 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.
  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.
  6. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
  7. Nick Bloom & John Van Reenen, 2006. "Measuring and explaining management practices across firms and countries," LSE Research Online Documents on Economics 733, London School of Economics and Political Science, LSE Library.
  8. Zvi Griliches, 1995. "The Discovery of the Residual: An Historical Note," NBER Working Papers 5348, National Bureau of Economic Research, Inc.
  9. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999. "Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence," NBER Working Papers 7136, National Bureau of Economic Research, Inc.
  10. Chang, Tai Hsieh & Peter, J- Klenow, 2007. "Misallocation and manufacturing TFP in China and India," MPRA Paper 35084, University Library of Munich, Germany, revised 15 Jun 2007.
  11. Lucia Foster & John Haltiwanger & Chad Syverson, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," Working Papers 05-11, Center for Economic Studies, U.S. Census Bureau.
  12. 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.
  13. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  14. Charles I. Jones & Paul M. Romer, 2009. "The New Kaldor Facts: Ideas, Institutions, Population, and Human Capital," NBER Working Papers 15094, National Bureau of Economic Research, Inc.
  15. Chad Syverson, 2003. "Product Substitutability and Productivity Dispersion," NBER Working Papers 10049, National Bureau of Economic Research, Inc.
  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. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and measuring organization capital," Staff Report 291, Federal Reserve Bank of Minneapolis.
  18. Zvi Griliches, 1995. "The Discovery of the Residual: A Historic Note," Harvard Institute of Economic Research Working Papers 1742, Harvard - Institute of Economic Research.
  19. 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.
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