What Drives Differences in Management Practices?

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

Management Practices in Croatia: Drivers and Consequences for Firm Performance

“…productivity, profits, adoption of technology). Following the scoring matrix of Bloom et al (2019a), firm responses to questions on managerial practices is aggregated into a single management score that ranges from between 0 and 1 with 1.0 reflecting perfect (more formal, frequent and explicit) adoption of all structured management practice, and 0 score reflects the other extreme.…”

“…Analysis of this newly collected survey data in Croatia, suggests that, first, an average manufacturing firm in Croatia scores 0.538 in adoption of advanced management practices, a value behind the one in frontier economies such as the United States (0.615, Bloom et al, 2019a). Comparing Croatia's management practices with countries for which comparable data is available 5 , we find that an average manufacturing firm in Croatia is better managed than its counterparts in Russia (average score, 0.432; Grover and Torre, 2019) and Mexico (average score, 0.42; Bloom et al, 2019b) (Tables 1a and 1b), although we are concerned that the relatively higher score in Croatia vis-à-vis Mexico, for instance, could be the result of low response rate, leading to a possible selection bias and due to differences in coverage with respect to firm size in the sampling frame.…”

“…As in Russia (Grover and Torre, 2019), Mexico (Bloom et al, 2019b) and the United States (Bloom et al, 2019a), adoption of structured management practices across firms in Croatia is quite heterogeneous.…”

“…In order to systematically test this relationship between management capabilities and firm performance, we follow Bloom et al (2019a) approach and start from a standard production function:…”

“…Relative to the US, Croatia has a lot of badly managed firms, and fewer of the better managed ones16 Some examples are inBloom et al (2019a) while detailed instructions for assigning scores are available on the United States census website. Available on http://bhs.econ.census.gov/bhs/mops/SUR766_9.html 17 Of the 727 manufacturing firms surveyed in the five regions in Croatia, all of them have more than 10 non-missing responses that allows for computing a more precise management score(Bloom et al, 2019a).…”