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Management as a Technology?

Author

Listed:
  • Nicholas Bloom
  • Raffaella Sadun
  • John Van Reenen

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?," NBER Working Papers 22327, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22327
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    References listed on IDEAS

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    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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    1. Labour repression & the Indo-Japanese divergence
      by pseudoerasmus in Pseudoerasmus on 2017-10-02 06:04:55

    Citations

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    Cited by:

    1. Pian Shu & Claudia Steinwender, 2019. "The Impact of Trade Liberalization on Firm Productivity and Innovation," Innovation Policy and the Economy, University of Chicago Press, vol. 19(1), pages 39-68.
    2. Valero, Anna & Van Reenen, John, 2019. "The economic impact of universities: Evidence from across the globe," Economics of Education Review, Elsevier, vol. 68(C), pages 53-67.
    3. Sacarny, Adam, 2018. "Adoption and learning across hospitals: The case of a revenue-generating practice," Journal of Health Economics, Elsevier, vol. 60(C), pages 142-164.
    4. Nezih Guner & Andrii Parkhomenko & Gustavo Ventura, 2018. "Managers and Productivity Differences," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 29, pages 256-282, July.
    5. 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.
    6. Aghion, Philippe & Bloom, Nick & Lucking, Brian & Sadun, Raffaella & Van Reenen, John, 2017. "Turbulence, firm decentralization and growth in bad times," LSE Research Online Documents on Economics 83613, London School of Economics and Political Science, LSE Library.
    7. repec:cpr:ceprdp:14299 is not listed on IDEAS
    8. Michael Barry & Alex Bryson & Rafael Gomez & Bruce Kaufman & Guenther Lomas & Adrian Wilkinson, 2018. "The ''Good Workplace'': The Role of Joint Consultative Committees, Unions and HR policies in Employee Ratings of Workplaces in Britain," DoQSS Working Papers 18-08, Department of Quantitative Social Science - UCL Institute of Education, University College London.
    9. Feng, Andy & Valero, Anna, 2019. "Skill based management: evidence from manufacturing firms," LSE Research Online Documents on Economics 102603, London School of Economics and Political Science, LSE Library.
    10. Alex Bryson & Lucy Stokes & David Wilkinson, 2018. "Is Pupil Attainment Higher in Well-managed Schools?," DoQSS Working Papers 18-09, Department of Quantitative Social Science - UCL Institute of Education, University College London.
    11. Gonzalez-Uribe, Juanita & Leatherbee, Michael, 2018. "The effects of business accelerators on venture performance: evidence from start-up Chile," LSE Research Online Documents on Economics 84553, London School of Economics and Political Science, LSE Library.
    12. Mika Maliranta & Satu Nurmi, 2019. "Business owners, employees, and firm performance," Small Business Economics, Springer, vol. 52(1), pages 111-129, January.
    13. Nezih Guner & Andrii Parkhomenko & Gustavo Ventura, 2017. "Managers and Productivity Differences," Working Papers wp2018_1710, CEMFI.
    14. Marcel Fafchamps & Simon Quinn, 2018. "Networks and Manufacturing Firms in Africa: Results from a Randomized Field Experiment," World Bank Economic Review, World Bank Group, vol. 32(3), pages 656-675.
    15. Dimitrios Exadactylos & Massimo Riccaboni & Armando Rungi, 2019. "Talents from Abroad. Foreign Managers and Productivity in the United Kingdom," Working Papers 01/2019, IMT Institute for Advanced Studies Lucca, revised Dec 2019.
    16. Ketels Christian, 2017. "Working Paper 258 - Structural Transformation: A competitiveness-based view," Working Paper Series 2369, African Development Bank.
    17. Michael White & Alex Bryson, 2018. "HPWS in the Public Sector: Are There Mutual Gains?," DoQSS Working Papers 18-10, Department of Quantitative Social Science - UCL Institute of Education, University College London.
    18. Fredrik Heyman & Pehr‐Johan Norbäck & Rickard Hammarberg, 2019. "Foreign Direct Investment, Source Country Heterogeneity and Management Practices," Economica, London School of Economics and Political Science, vol. 86(342), pages 362-395, April.
    19. Jona-Lasinio, Cecilia & Manzocchi, Stefano & Meliciani, Valentina, 2019. "Knowledge based capital and value creation in global supply chains," Technological Forecasting and Social Change, Elsevier, vol. 148(C).
    20. Romano, Livio, 2019. "Explaining growth differences across firms: The interplay between innovation and management practices," Structural Change and Economic Dynamics, Elsevier, vol. 49(C), pages 130-145.
    21. Jason Sandvik & Richard Saouma & Nathan Seegert & Christopher T. Stanton, 2020. "Workplace Knowledge Flows," NBER Working Papers 26660, National Bureau of Economic Research, Inc.
    22. Bräuer, Richard & Mertens, Matthias & Slavtchev, Viktor, 2019. "Import competition and firm productivity: Evidence from German manufacturing," IWH Discussion Papers 20/2019, Halle Institute for Economic Research (IWH).
    23. Andy Feng & Anna Valero, 2019. "Skill Biased Management: Evidence from Manufacturing Firms," CEP Discussion Papers dp1594, Centre for Economic Performance, LSE.
    24. Delis, Manthos D. & Tsionas, Mike G., 2018. "Measuring management practices," International Journal of Production Economics, Elsevier, vol. 199(C), pages 65-77.

    More about this item

    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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