Manufacturing & General

Here you will find the academic research papers in manufacturing as well as general survey papers.

Published papers
International data on measuring management practices

Nick Bloom, Renata Lemos, Raffaella Sadun Daniela Scur and John Van Reenen, 2016

Published in American Economic Review – Papers & Proceedings

Rapid advances in computer power and increased openness of national statistical agencies have led to unprecedented availability of large datasets. Consider three types of firm datasets. First, governments collect administrative data on firms: information on jobs, investment and output has long been collected to calculate national, industrial and regional statistics. Second, there has been an explosion of Big Data – various forms of data typically created for business purposes. We focus on a third type of international firm data, which is collected from surveys.

PDF

Are founder CEOs good managers?

Victor Manuel Bennett, Meghan Lawrence, Raffaella Sadun, 2015

NBER chapter

PDF

Do Private Equity Owned Firms have better management practices?

Nick Bloom, Raffaella Sadun and John Van Reenen, 2015

Published in American Economic Review Papers and Proceedings

We use an innovative survey tool to collect management practice data from over 4,000 medium sized manufacturing firms across Asia, Europe and the US. These measures of managerial practice are strongly associated with firm-level performance (e.g. productivity, profitability and stock market value). Private equity firms are significantly better managed than government, family and privately owned firms. Although they are also better managed on average than publicly listed firms with dispersed owners, this difference is not statistically significant. Looking at management practices in detail we find that private equity owned firms have strong people management practices (hiring, firing, pay and promotions) but even stronger operations management practices (lean manufacturing, continuous improvement and monitoring). This suggests that private equity ownership is associated with broad based operational improvement in management rather than just stronger performance incentives. Finally, looking at changes in management practices over time, it appears that PE targets poorly managed firms and these firms improve their management practices at a faster rate than other ownership types.

WORKING PAPER PDF ARTICLE PDF

The distinct effects of Information Technology and Communication Technology on firm organization

Nick Bloom, Luis Garicano, Raffaella Sadun and John Van Reenen, 2014

Published in Management Science

Guided by theories of management by exception, we study the impact of Information and Communication Technology on worker and plant manager autonomy and on span of control. We find, using an original dataset of American and European manufacturing firms, that better information technologies (Enterprise Resource Planning for plant managers and CAD/CAM for production workers) are associated with more autonomy and a wider span, while technologies that improve communication (like data intranets) decrease autonomy for workers and plant managers, consistently with the theory. Using instrumental variables (distance from ERP’s birthplace and heterogeneous telecommunication costs arising from regulation) strengthens our results.

PDF

Does management matter: evidence from India

Nick Bloom, Benn Eifert, Aprajit Mahajan, David McKenzie and John Roberts, 2013

Published in The Quarterly Journal of Economics

A joint Stanford University and World Bank team is running a management field experiment in India. The project is working with 28 plants in large multi-plant firms to provide randomized free management consultancy to a treatment group alongside a control group. We are monitoring both groups and evaluating the impact of improved management on firm performance. The management treatment is being carried out by Accenture, a leading international consulting firm. The research is investigating the causal impact of the adoption of modern quality, inventory and efficiency management practices.

PDF

Americans do I.T. Better: US Multinationals and the Productivity Miracle

Nicholas Bloom, Raffaella Sadun and John Van Reenen, 2012
Published in the American Economic Review

The US experienced a sustained increase in productivity growth in the decade after 1995, particularly in sectors that intensively use information technologies (IT). This “productivity miracle” did not occur in Europe. This paper uses two distinct micro datasets to show that US multinationals operating in Europe also experienced a “productivity miracle”. US multinationals obtained higher productivity from IT than non-US multinationals in Europe, particularly in the sectors responsible for the US productivity acceleration. Furthermore, establishments that were taken over by US multinationals increased the productivity of their IT, whereas observationally identical establishments taken over by non-US multinationals did not. Combining a new panEuropean IT dataset with our firm-level management practices survey, we find that the US advantage in IT is primarily due to its “people management” practices on promotions, rewards, hiring and firing. US-style people management appears to be associated with the ability to adopt new IT more effectively. As a result US firms at home and abroad experienced large increases in productivity growth when IT investment rose sharply after 1995. We can account for about half of the US-EU difference in productivity growth using our estimates.

pdf

The Land that Lean Manufacturing Forgot: Management Practices in Transition Countries

Nicholas Bloom, Helena Schweiger and John Van Reenen, 2011
Published in The Economics of Transition

We have conducted the first large-scale survey on management practices in transition countries. We found that Central Asian transition countries, such as Uzbekistan and Kazakhstan, have on average very poor management practices. Their average scores are below developing countries such as India. In contrast, the Central European transition countries such as Poland and Lithuania operate with management practices that are only moderately worse than those of Western European countries such as Germany. As we find these practices are strongly linked to firm performance, this suggests that poor management practices may be impeding the development of Central Asian transition countries. We find that competition, multinational ownership, private ownership and human capital are all strongly correlated with better management. If causally interpreted, this would imply that the continued opening of markets to domestic and foreign competition, privatization of state-owned firms and increased levels of workforce education should promote better management, and ultimately faster economic growth.

pdf

Are Family Friendly Workplace Practices A Valuable Firm Resource?

Nicholas Bloom, Toby Kretschmer and John Van Reenen, 2010
Published in the Strategic Management Journal

This paper examines firm and environmental characteristics which may determine better family-friendly workplace practices.

pdf

New approaches to measuring management and firm organization

Nicholas Bloom and John Van Reenen, 2010
Published in the American Economic Review: Papers & Proceedings

This paper examines new approaches to surveying organizations.

pdf

Does product market competition lead firms to decentralize?

Nicholas Bloom, Raffaella Sadun and John Van Reenen, 2010
Published in the American Economic Review: Papers & Proceedings

There is a widespread sense that over the last two decades firms have been decentralizing decisions to employees further down the managerial hierarchy. Economists have developed a range of theories to account for delegation, but there is less empirical evidence, especially across countries. This has limited the ability to understand the phenomenon of decentralization. To address this empirical lacuna we have developed a research program to measure the internal organization of firms—including their decentralization decisions—across a large range of industries and countries. In this paper we investigate whether greater product market competition increases decentralization.

pdf

Modern management: Good for the Environment or just Hot Air?

Nicholas Bloom, Christos Genakos, Ralf Martin and Raffaella Sadun, 2010
Published in theThe Economic Journal

We use an innovative methodology to measure management practices in over 300 manufacturing firms in the UK. We then match this management data to production and energy usage information for establishments owned by these firms. We find that establishments in better managed firms are significantly less energy intensive. This effect is quantitatively substantial: going from the 25th to the 75th percentile of management practices is associated with a 17.4% reduction in energy intensity. Better managed firms are also significantly more productive. These results suggest that management practices that are associated with improved productivity are also linked to lower greenhouse gas emissions.

see the pdf

The organization of firms across countries

Nicholas Bloom, Raffaella Sadun and John Van Reenen, 2009
Published in The Quarterly Journal of Economics

We argue that social capital as proxied by trust increases aggregate productivity by affecting the organization of firms. To do this we collect new data on the decentralization of investment, hiring, production, and sales decisions from corporate headquarters to local plant managers in almost 4,000 firms in the United States, Europe, and Asia. We find that firms headquartered in high-trust regions are significantly more likely to decentralize. To help identify causal effects, we look within multinational firms and show that higher levels of bilateral trust between the multinational’s country of origin and subsidiary’s country of location increases decentralization, even after instrumenting trust using religious similarities between the countries. Finally, we show evidence suggesting that trust raises aggregate productivity by facilitating reallocation between firms and allowing more efficient firms to grow, as CEOs can decentralize more decisions.

pdf

Do private equity owned firms have better management practices?

Nicholas Bloom, Raffaella Sadun and John Van Reenen, 2009
Published in the American Economic Review: Papers & Proceedings

Private equity (PE) ownership has become commonplace within the United States, and is increasing its presence across Europe and Asia. However, there is still some debate over the impact of PE acquisitions on firms and the channel through which these affect organizations. In this paper we peek inside the black box of PE ownership by examining the association between PE ownership and management practices.

pdf

The distinct effect of communication technology and information technology on firm organization

Nicholas Bloom, Luis Garicano, Raffaella Sadun and John Van Reenen, 2009
Published in Management Science

We argue that social capital as proxied by trust increases aggregate productivity by affecting the organization of firms. To do this we collect new data on the decentralization of investment, hiring, production, and sales decisions from corporate headquarters to local plant managers in almost 4,000 firms in the United States, Europe, and Asia. We find that firms headquartered in high-trust regions are significantly more likely to decentralize. To help identify causal effects, we look within multinational firms and show that higher levels of bilateral trust between the multinational’s country of origin and subsidiary’s country of location increases decentralization, even after instrumenting trust using religious similarities between the countries. Finally, we show evidence suggesting that trust raises aggregate productivity by facilitating reallocation between firms and allowing more efficient firms to grow, as CEOs can decentralize more decisions.

working paper pdf

Measuring and Explaining Management Practices Across Firms and Countries

Nicholas Bloom and John Van Reenen, 2007
Published in theThe Quarterly Journal of Economics

We use an innovative survey tool to collect management practice data from 732 medium-sized firms in the United States, France, Germany, and the United Kingdom. These measures of managerial practice are strongly associated with firm-level productivity, profitability, Tobin’s Q, and survival rates. Management practices also display significant cross-country differences, with U.S. 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 product market competition is weak and/or when family-owned firms pass management control down to the eldest sons (primogeniture).

paper pdf working paper pdf

Survey Papers
The New Empirical Economics of Management

Nicholas Bloom, Renata Lemos, Raffaella Sadun, Daniela Scur and John Van Reenen, 2014
Published in the Journal of the European Economic Association

Over the last decade the World Management Survey (WMS) has collected firm-level management practices data across multiple sectors and countries. We developed the survey to try to explain the large and persistent TFP differences across firms and countries. This review paper discusses what has been learned empirically and theoretically from the WMS and other recent work on management practices. Our preliminary results suggest that about a quarter of cross-country and within-country TFP gaps can be accounted for by management practices. Management seems to matter both qualitatively and quantitatively. Competition, governance, human capital and informational frictions help account for the variation in management.

pdf

Incomplete Contracts and the Internal Organisation of Firms

Phillipe Aghion, Nicholas Bloom, and John Van Reenen, 2014
Published in Journal of Law, Economics and Organization

This paper surveys the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making within firms. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap.

pdf

Management practices across firms and countries

Nicholas Bloom, Christos Genakos, Raffaella Sadun and John Van Reenen, 2012
Published in the Academy of Management Perspectives

This paper presents evidence from our cross-country management data to examine substantial variation in management practices across organizations in every country, mirroring the heterogeneity in the spread of performance in the manufacturing, healthcare, education and retail sectors.

pdf

Does competition raise productivity through improving management practices?

John Van Reenen, 2011
Published in the International Journal of Industrial Organization

pdf

Why do management practices differ across firms and countries?

Nicholas Bloom and John Van Reenen, 2010
Published in the Journal for Economics Perspectives

pdf

Human resource management and productivity

Nicholas Bloom and John Van Reenen, 2010
Published in the Handbook of Labor Economics

This paper examines the relationship between Human Resource Management and productivity, looking at some of the determinants of HRM risk, competition, ownership and regulation and analyzing the impact of HRM on productivity.

pdf

Recent advances in the empirics of organizational economics

Nicholas Bloom, Raffaella Sadun and John Van Reenen, 2009
Published in the Annual Review of Economics

This paper surveys the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making within firms. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap.

pdf

Management practices, work-life balance, and productivity: a review of some recent evidence

Nicholas Bloom and John Van Reenen, 2006
Published in the Oxford Review of Economic Policy

pdf

Working Papers & Reports
Management Practices, Workforce Selection and Productivity

Stefan Bender, Nick Bloom, David Card and John Van Reenen, 2016
CEP Discussion Paper 1416

Recent research suggests that much of the cross-firm variation in measured productivity is due to differences in use of advanced management practices. Many of these practices – including monitoring, goal setting, and the use of incentives – are mediated through employee decision-making and effort. To the extent that these practices are complementary with workers’ skills, better-managed firms will tend to recruit higher-ability workers and adopt pay practices to retain these employees. We use a unique data set that combines detailed survey data on the management practices of German manufacturing firms with longitudinal earnings records for their employees to study the relationship between productivity, management, worker ability, and pay. As documented by Bloom and Van Reenen (2007) there is a strong partial correlation between management practice scores and firm-level productivity in Germany. In our preferred TFP estimates only a small fraction of this correlation is explained by the higher human capital of the average employee at better-managed firms. A larger share (about 13%) is attributable to the human capital of the highest-paid workers, a group we interpret as representing the managers of the firm. And a similar amount is mediated through the pay premiums offered by better-managed firms. Looking at employee inflows and outflows, we confirm that better-managed firms systematically recruit and retain workers with higher average human capital. Overall, we conclude that workforce selection and positive pay premiums explain just under 30% of the measured impact of management practices on productivity in German manufacturing.

pdf

Management as a technology

Nick Bloom, Raffaella Sadun and John Van Reenen, 2014

Are some management practices akin to a technology that can explain company and national productivity, or are do they simply reflect alternative styles? We collect cross sectional and panel data on core management practices in over 10,000 firms in 30 countries. We find the US has the highest size-weighted average management score and about a fifth of the crosscountry “management gap” is due to stronger reallocation effects which rewards better managed firms with greater market share. We present a formal model of management and use SMM to structurally estimate it on our panel data in order to recover key parameters such as the adjustment costs of managerial capital (which are twice those of tangible capital). Our model predicts (i) a positive effect of management on firm performance; (ii) a positive effect of product market competition (and lower distortions) on average management quality and its covariance with firm size; and (iii) a rise (fall) in the level (dispersion) of management with firm age. These are not moments we use in the structural estimation and we find empirical support for all of these predictions in our new data. Building on our model we find that the US lead in management explains about a quarter of its productivity advantage over other nations.

pdf

A snapshot of mid-sized firms in Africa, Asia and Latin America

Renata Lemos and Daniela Scur, 2015
Unpublished report: LSE mimeo

This report provides a basic set aggregate descriptive data at the country-level collected through the World Management Survey waves, including management practices, work-life balance practices, human capital, decentralization and available infrastructure in medium- and large-sized firms in Africa, Asia, and Latin American developing countries. It also describes the data collection process in great detail. As the database becomes increasingly used by researchers, we hope this report can serve as an “expanded methodology and data manual” for the WMS, where we not only detail the data collection process but also include an Appendix on the construction of the sampling frames. This is particularly important for countries and sectors where we could not find a publicly available list, so we note the challenges of data collection in these countries and how we approached the solutions to these challenges.

pdf

IT and Management in America

Nick Bloom, Erik Brynjolfsson, Lucia Foster, Ron Jarmin, Megha Patnaik, Itay Saporta-Eksten, John Van Reenen, 2014
CEP Discussion Paper 1258

pdf

Why management matters for productivity

John Dowdy and John Van Reenen, 2007
Published in McKinsey Quarterly: Why management matters for productivity

pdf