What Drives Differences in Management Practices?

By Nicholas Bloom, Erik Brynjolfsson, L. Foster, Ron S. Jarmin, Megha Patnaik, Itay Saporta-Eksten, John Van Reenen. The American Economic Review, 2019

368 citations recorded by the source corpus.

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 county, increases the management scores of incumbents. (JEL D22, D24, L25, L60, M11, M50)

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/dc2eafffd180941473600f3d9d5a481abf2e8478

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Citations in the corpus

Management and Shocks to Worker Productivity (2019, positive): “Managerial quality is highly associated with firm productivity (Adhvaryu, 2018; Adhvaryu et al., 2018; Bloom and Reenen, 2011; Bloom and Van Reenen, 2007; McKenzie and Woodruff, 2016), including in experimental studies (Bloom et al., 2013, 2018b; Karlan et al., 2015; McKenzie and Woodruff, 2013).”
Common Ownership, Competition, and Top Management Incentives (2016, background): “…justification for this assumption is the presence of large and persistent differences in productivity levels across businesses (Syverson 2011; Backus 2020) that are strongly influenced bymanagement practices (Bloom and Van Reenen 2007; Bloom, Sadun, and Van Reenen 2012a; Bloom et al. 2019, 2021).”
The Impact of Management Practices on Employee Productivity: A Field Experiment with Airline Captains (2019, result): “…all targets were capped at 90% of a captain’s flights to alleviate pressure and allow flexibility in decision- 5These findings are consistent with two studies in the developed world that show that management practices may causally impact on productivity (Fryer Jr., 2017; Bloom et al., 2018).”
The Impact of COVID-19 on US Firms (2021, background): “One possible explanation is management practices, since larger firms tend to be better managed (e.g. Appendix Figure A6 and Bloom et al. 2019) and may also be better able to cope with the pandemic recession.”
Engineering Value: The Returns to Technological Talent and Investments in Artificial Intelligence (2019, positive): “I estimate the causal effect of additional engineering investment using proximity to land-grant colleges (Moretti 2004; Bloom et al. 2018), changes in state-level covenant-to-not-compete (CNC) policy (Marx, Strumsky, and Fleming 2009; Marx 2011; Ewens and Marx 2017; Starr, Balasubramanian, and”
People Management Skills, Employee Attrition, and Manager Rewards: An Empirical Analysis (2020, positive): “…a growing literature shows that management practices affect ﬁrm performance and help explain these productivity differences (Ichniowski, Shaw, and Prennushi 1997; Ichniowski and Shaw 1999; Bloom and Van Reenen 2007; Bloom et al. 2013, 2019), less attention has been devoted to managers themselves.”
Difference-in-Differences Estimators of Intertemporal Treatment Effects (2020, neutral): “Of the 42 states that lift at least one restriction from 1994 to 2005, 38 do so for the first time in 1995, 12The aggregation of these qualitatively different deregulations into a scalar variable seems uncontroversial in the finance literature. 13Favara and Imbs (2015) also study the effect of banki”