The Case for Excellence in Management: The Effects of Management Practices on Productivity

22 Pages Posted: 4 Nov 2015

See all articles by Kieron Meagher

Kieron Meagher

Australian National University (ANU) - School of Economics

Rodney W. Strachan

University of Queensland - School of Economics

Date Written: November 3, 2015

Abstract

It is well established that management practices have on average a significant and large impact on firm output after controlling for a range of standard factors such as other inputs, industry etc. We investigate non-linearities in the impact of management practices on firm performance using Gaussian process and a continuous piece-wise linear approach with probabilistically smoothed endogenous breaks. In all cases we find significant evidence of a U-shaped relationship: the impact of better management practices are 40% smaller than previously thought for the majority of the population but between 3 and 7 times larger for firms in the top tail.

Keywords: Productivity, Management Practices, Superadditive, Complements, Gaussian Process, Bayesian Model Averaging, Piecewise Linear

JEL Classification: D22, D23, D24, L23, L60

Suggested Citation

Meagher, Kieron and Strachan, Rodney W., The Case for Excellence in Management: The Effects of Management Practices on Productivity (November 3, 2015). Available at SSRN: https://ssrn.com/abstract=2685433 or http://dx.doi.org/10.2139/ssrn.2685433

Kieron Meagher (Contact Author)

Australian National University (ANU) - School of Economics ( email )

Coombs Building 9
Canberra, Australian Capital Territory 0200
Australia

Rodney W. Strachan

University of Queensland - School of Economics ( email )

Brisbane, QLD 4072
Australia

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