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

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

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

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  1. 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.
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  4. 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.
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  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. Ronald J Shadbegian & Wayne B Gray, 2003. "What Determines Environmental Performance at Paper Mills? The Roles of Abatement Spending, Regulation, and Efficiency," Working Papers 03-10, Center for Economic Studies, U.S. Census Bureau.
  11. 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.
  12. 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.
  13. 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.
  14. 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.
  15. Robert Ayres, 1994. "On economic disequilibrium and free lunch," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 4(5), pages 435-454, October.
  16. 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.
  17. 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.
  18. DeCanio, Stephen J., 1993. "Barriers within firms to energy-efficient investments," Energy Policy, Elsevier, vol. 21(9), pages 906-914, September.
  19. 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.
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