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What Drives Differences in Management Practices?

Author

Listed:
  • Nicholas Bloom
  • Erik Brynjolfsson
  • Lucia Foster
  • Ron Jarmin
  • Megha Patnaik
  • Itay Saporta-Eksten
  • John Van Reenen
Abstract
Partnering with the US Census Bureau, we implement a new survey of "structured" management practices in two waves of 35,000 manufacturing plants in 2010 and 2015. We find an enormous dispersion of management practices across plants, with 40 percent of this variation across plants within the same firm. Management practices account for more than 20 percent of the variation in productivity, a similar, or greater, percentage as that accounted for by R&D, ICT, or human capital. We find evidence of two key drivers to improve management. The business environment, as measured by right-to-work laws, boosts incentive management practices. Learning spillovers, as measured by the arrival of large "Million Dollar Plants" in the country, increase the management scores of incumbents.

Suggested Citation

  • Nicholas Bloom & Erik Brynjolfsson & Lucia Foster & Ron Jarmin & Megha Patnaik & Itay Saporta-Eksten & John Van Reenen, 2019. "What Drives Differences in Management Practices?," American Economic Review, American Economic Association, vol. 109(5), pages 1648-1683, May.
    • Handle: RePEc:aea:aecrev:v:109:y:2019:i:5:p:1648-83
    Note: DOI: 10.1257/aer.20170491
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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