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Does Competition Raise Productivity Through Improving Management Quality?

  • John Van Reenen

A classic question in industrial organization is whether competition raises productivity and if so, through what mechanism? I discuss recent empirical evidence from both large-scale databases and specific industries which suggests that tougher competition does indeed raise productivity and one of the main mechanisms is through improving management practices. To establish this, I report on new research seeking to quantify management. I relate this to theoretical perspectives on the economics of competition and management, arguing that management should be seen at least in part as a transferable technology. A range of recent econometric studies suggest that (i) competition increases management quality and (ii) improved management quality boosts productivity.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1036.

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Date of creation: Dec 2010
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Handle: RePEc:cep:cepdps:dp1036
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