Measuring and Explaining Management Practices Across Firms and Countries

Posted: 1 Dec 2009

See all articles by Nicholas Bloom

Nicholas Bloom

Stanford University - Department of Economics; National Bureau of Economic Research (NBER)

John Van Reenen

London School of Economics - Centre for Economic Performance (CEP); Stanford Graduate School of Business; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 5 versions of this paper

Date Written: 2005

Abstract

Management practices of U.S. and European firms are explored in pursuit of an answer to two questions: why so many firms exist despite poor practices and why so much variability exists across countries. An innovative survey tool that scores 18 key management practices was applied to data collected on 732 medium-sized manufacturing firms in the United States, France, Germany, and the United Kingdom. It was found that the measures of best management practices correlate strongly with superior firm performance in terms of productivity, profitability, Tobin's Q, sales growth, and survival. Significant variation across countries was found, with U.S. firms being better managed than European ones. Firm survival, despite poor management, is found to be a combination of low product competition, allowing poor management practices to persist, and family firms passing management control down to first-born sons. European firms face lower levels of competition and have higher levels of passing firms to eldest sons than do U.S. firms. These two factors alone account for half of the large number of very badly managed firms and between two-thirds and one-third of the management gap between Europe and the United States. (LKB)

Keywords: Amadeus dataset, Compustat database, Firm productivity, Intergenerational transfer, National differences, Sales growth, Succession, Best practices, Earnings, Family firms, Firm management, Firm performance

Suggested Citation

Bloom, Nicholas and Van Reenen, John Michael, Measuring and Explaining Management Practices Across Firms and Countries (2005). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship. Available at SSRN: https://ssrn.com/abstract=1513807

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Stanford University - Department of Economics ( email )

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John Michael Van Reenen

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Centre for Economic Policy Research (CEPR)

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