Why Do Management Practices Differ Across Firms and Countries?

Abstract:     
Economists have long puzzled why there are such astounding differences in productivity between firms and countries. For example, looking as disaggregated data on U.S. manufacturing industries, Syverson (2004a) found that plants at the 90th percentile produced four times as much as the plant in the 10th percentile on a per-employee basis. At the country level, Hall and Jones (1999) and Jones and Romer (2009) show how the stark differences in productivity across countries account for a substantial fraction of the differences in average per capita income. One potential hypothesis has been that persistent productivity differentials are due to "hard" technological innovations as embodied in patents or adoption of new machinery. Although there has been substantial progress in improving our measures of technology, there remain substantial productivity differences even after controlling for such factors. In this paper, we present evidence on another possible explanation for persistent differences in productivity at the firm and the national level - namely, that such differences largely reflect variations in management practices.

Number of Pages in PDF File: 35

Keywords: management, productivity, growth, firm, innovation

JEL Classification: L2, M2, O32, O33

working papers series