What Drives Differences in Management?

Abstract

Partnering with the Census we implement a new survey of "structured" management practices in 32,000 US manufacturing plants. We find an enormous dispersion of management practices across plants, with 40% of this variation across plants within the same firm. This management variation accounts for about a fifth of the spread of productivity, a similar fraction as that accounted for by R&D, and twice as much as explained by IT. We find evidence for four "drivers" of management: competition, business environment, learning spillovers and human capital. Collectively, these drivers account for about a third of the dispersion of structured management practices.

Management practices and SME performance

“…However, firms in which the largest occupational group are Professionals use the highest number of management practices, on average. This is in line with prior evidence which suggests that the adoption of formal management practices is more extensive in firms with higher levels of employee human capital (Bloom et al ., , ). Turning to firm ownership characteristics, firms with an owner‐manager do not differ in the number of management practices from those where the roles of owner and manager are separated.…”

“…Similar results have been obtained in single‐country studies of manufacturing firms that focus on the same set of practices: see Bloom et al . () and Brynjolfsson and McElheran () for evidence from the USA, and Broszeit et al . () for evidence from Germany.…”

“…Evidence suggests that SMEs find it more difficult than larger firms to identify and adopt innovative technologies and working methods due to their weaker internal resources (Roper and Hart, ), with research focusing in particular on the lower (average) levels of managerial human capital and employee human capital in smaller firms, and the lesser involvement of SMEs in managerial networks (see Bloom et al ., ; Wu et al ., ). To the extent that SMEs are more likely to operate in smaller, more‐localized markets, this may also hold back the pursuit of ‘best practice’ by limiting the incentivizing effects of competition (on the general effects of competition, see Bloom et al ., , ). Under this perspective, if the returns to such practices are indeed universal, then the less extensive use of formal management practices among smaller firms may be seen as sub‐optimal.…”

Do Private Schools Manage Better?

“…Studies vary according to the range of management practices considered: Appelbaum et al (2000), for example, study a broad array of practices, while Bloom et al, (2017) focus more narrowly on worker monitoring, targets, and incentives. In a number of cases using quasiexperimental methods the association is shown to be causal (e.g.…”

Assessing the Variance in Pupil Attainment: How Important is the School Attended?

“…In a number of cases using quasiexperimental methods the association is shown to be causal (e.g. Bloom et al, 2017).…”