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Management as a Technology?

Author

Listed:
  • Nicholas Bloom

    () (Stanford University - Department of Economics)

  • Raffaella Sadun

    () (Harvard Business School, Strategy Unit)

  • John Van Reenen

    () (London School of Economics)

Abstract

Are some management practices akin to a technology that can explain firm and national productivity, or do they simply reflect contingent management styles? We collect data on core management practices from over 11,000 firms in 34 countries. We find large cross-country differences in the adoption of management practices, with the US having the highest size-weighted average management score. We present a formal model of "Management as a Technology", and structurally estimate it using panel data to recover parameters including the depreciation rate and adjustment costs of managerial capital (both found to be larger than for tangible non-managerial capital). Our model also predicts (i) a positive impact of management on firm performance; (ii) a positive relationship between product market competition and average management quality (part of which stems from the larger covariance between management with firm size as competition strengthens); and (iii) a rise in the level and a fall in the dispersion of management with firm age. We find strong empirical support for all of these predictions in our data. Finally, building on our model, we find that differences in management practices account for about 30% of total factor productivity differences both between countries and within countries across firms.

Suggested Citation

  • Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2016. "Management as a Technology?," Harvard Business School Working Papers 16-133, Harvard Business School, revised Oct 2017.
  • Handle: RePEc:hbs:wpaper:16-133
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    References listed on IDEAS

    as
    1. Luis Garicano & Claire Lelarge & John Van Reenen, 2016. "Firm Size Distortions and the Productivity Distribution: Evidence from France," American Economic Review, American Economic Association, vol. 106(11), pages 3439-3479, November.
    2. Kalemli-Ozcan, Sebnem & Sorensen, Bent E. & Villegas-Sanchez, Carolina & Volosovych, Vadym & Yesiltas, Sevcan, 2015. "How to construct nationally representative firm level data from the ORBIS global database," CEPR Discussion Papers 10829, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Alex Bryson & John Forth, 2018. "The Impact of Management Practices on SME Performance," National Institute of Economic and Social Research (NIESR) Discussion Papers 488, National Institute of Economic and Social Research.
    2. Marcel Fafchamps & Simon Quinn, 2014. "Networks and Manufacturing Firms in Africa: Results from a Randomized Field Experiment," CSAE Working Paper Series 2014-25, Centre for the Study of African Economies, University of Oxford.
    3. Ketels Christian, 2017. "Working Paper 258 - Structural Transformation: A competitiveness-based view," Working Paper Series 2369, African Development Bank.
    4. repec:eee:proeco:v:199:y:2018:i:c:p:65-77 is not listed on IDEAS

    More about this item

    Keywords

    management practices; productivity; competition;

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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