What Drives Differences in Management?

Nicholas Bloom, Erik Brynjolfsson, Lucia Foster, Ron Jarmin, Megha Patnaik, Itay Saporta-Eksten and John Van Reenen

NBER Working Paper

2016

This paper analyzes a recent Census Bureau survey of “structured” management practices in over 30,000 U.S. plants. Analyzing these data reveals massive variation in management practices across plants, with half of this variation being across plants within the same firm. The management index accounts for just under a fifth of the spread of TFP between the 90th and 10th percentiles, a similar fraction to that explained by R&D and over twice as much as explained by IT. We find evidence for four causal “drivers” of structured management: product market competition (e.g. the Lerner index, exchange rate shocks), state business environment (as proxied by “Right to Work” laws), learning spillovers (e.g. proximity to “Million Dollar Plant” openings) and human capital (e.g. proximity to land grant colleges). Collectively these drivers account for around one third to the total variation in management.

Management of Technological Innovation and R&D, Technological Change: Choices and Consequences, Diffusion Processes

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