Management as a Technology?

67 Pages Posted: 20 Jun 2016

See all articles by Nicholas Bloom

Nicholas Bloom

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

Raffaella Sadun

Harvard University - Strategy Unit; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

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 3 versions of this paper

Abstract

Are some management practices akin to a technology that can explain company 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 basic 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 effect 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 (fall) in the level (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 cross-country total factor productivity differences.

Keywords: management practices, productivity, competition

JEL Classification: L2, M2, O32, O33

Suggested Citation

Bloom, Nicholas and Sadun, Raffaella and Van Reenen, John Michael, Management as a Technology?. IZA Discussion Paper No. 9987. Available at SSRN: https://ssrn.com/abstract=2797558

Nicholas Bloom (Contact Author)

Stanford University - Department of Economics ( email )

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HOME PAGE: http://economics.stanford.edu/faculty/bloom

National Bureau of Economic Research (NBER) ( email )

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Raffaella Sadun

Harvard University - Strategy Unit ( email )

Harvard Business School
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United States

HOME PAGE: http://people.hbs.edu/rsadun

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

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United Kingdom

HOME PAGE: http://cep.lse.ac.uk/_new/staff/person.asp?id=1758

National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

John Michael Van Reenen

London School of Economics - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6976 (Phone)
+44 20 7955 6848 (Fax)

Stanford Graduate School of Business ( email )

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Institute for Fiscal Studies (IFS) ( email )

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+44 20 7240 6740 (Phone)
+44 20 7240 6136 (Fax)

Centre for Economic Policy Research (CEPR)

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United Kingdom

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