What Matters for Managerial Practices?

Abstract

Persistent performance differences across seemingly similar enterprises is a central puzzle in Strategy. Differences in management practices, particularly those captured by the World Management Survey (WMS), have been argued to account for some of this variation in performance. We parallel the prior performance decomposition literature in order to additionally estimate how much variance in performance can be attributed to this particular form of management. We find that about 13% of the variance in sales can be attributed to WMS practices, which raises the question of what drives those practices. We then decompose the variance in management practices. In doing so, we provide a bridge between the economics and strategy literatures on management practices.

Keywords: Strategy, Management Practices, Industry Analysis, Variance Decomposition, Methods