Measuring and Explaining Management Practices Across Firms and Countries

72 Pages Posted: 28 Jun 2006

See all articles by John Van Reenen

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)

Nicholas Bloom

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

Multiple version iconThere are 5 versions of this paper

Date Written: March 2006

Abstract

We use an innovative survey tool to collect management practice data from 732 medium sized manufacturing firms in the US, France, Germany and the UK. These measures of managerial practice are strongly associated with firm-level productivity, profitability, Tobin's Q, sales growth and survival rates. Management practices also display significant cross-country differences with US firms on average better managed than European firms, and significant within-country differences with a long tail of extremely badly managed firms. We find that poor management practices are more prevalent when (a) product market competition is weak and/or when (b) family-owned firms pass management control down to the eldest sons (primo geniture). European firms report lower levels of competition, while French and British firms also report substantially higher levels of primo geniture due to the influence of Norman legal origin and generous estate duty for family firms. We calculate that product market competition and family firms account for about half of the long tail of badly managed firms and up to two thirds of the American advantage over Europe in management practices.

Keywords: Management practices, productivity, competition, family firms

JEL Classification: L2, M2, O32, O33

Suggested Citation

Van Reenen, John Michael and Bloom, Nicholas, Measuring and Explaining Management Practices Across Firms and Countries (March 2006). CEPR Discussion Paper No. 5581. Available at SSRN: https://ssrn.com/abstract=912695

John Michael Van Reenen (Contact Author)

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

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Stanford Graduate School of Business ( email )

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Centre for Economic Policy Research (CEPR)

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Nicholas Bloom

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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