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• Article | Harvard Business Review | November 2012

  Does Management Really Work?

  Nicholas Bloom, Raffaella Sadun and John Van Reenen

  HBR's 90th anniversary is a sensible time to revisit a basic question: Are organizations more likely to succeed if they adopt good management practices? The answer may seem obvious to most HBR readers, but these three economists cast their net much wider than that. In a decade-long study of thousands of organizations in 20 countries, they and their interview team assessed how well manufacturers, schools, and hospitals adhere to three management basics: targets, incentives, and monitoring. They found that huge numbers of companies follow none of those fundamentals, that adopting the basics yields big improvements in outcomes such as productivity and longevity, and that good nuts-and-bolts management at individual firms shapes national performance. At 14 textile manufacturers in India, for example, an intervention—involving free, high-quality advice from a consultant who was on-site half-time for five months—cut defects by half, reduced inventory by 20%, and raised output by 10%. A control group saw no such gains. The authors' global data set suggests that implementing good management at schools and hospitals yields change more slowly than at manufacturers—but it does come eventually. And the macroeconomic potential—for incomes, productivity, and delivery of critically needed services—is huge. A call for "better management" may sound prosaic, but given the global payoffs, it's actually quite radical.

  Keywords: BEST practices; CONSULTING firms; CORPORATIONS; COST control; employee training; EXECUTIVE ability (Management); executives--training of; hospitals--administration; industrial management--research; pProductiviy incentives; SCHOOL management teams; work environment; Management; Research;

  Citation:

  Bloom, Nicholas, Raffaella Sadun, and John Van Reenen. "Does Management Really Work?" Harvard Business Review 90, no. 11 (November 2012).

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• Article | Quarterly Journal of Economics | November 2012

  The Organization of Firms Across Countries

  Nicholas Bloom, Raffaella Sadun and John Van Reenen

  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 more likely to decentralize, with trust accounting for about half of the variation in decentralization in our data. 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 and ethnic similarities between the countries. Trust raises aggregate productivity through two channels: (1) trust facilitates reallocation between firms by allowing more efficient firms to grow as CEOs can decentralize more decisions and (2) trust complements the adoption of new technologies, thereby increasing productivity within firms during times of rapid technological change.

  Keywords: Decentralization; Social capital; Theory of the Firm; Firm Objectives, Organization, and Behavior; business economics; Management of Technological Innovation and R＆D; Technological Change: Choices and Consequences; Diffusion Processes; Organizational Structure; Performance Productivity; Trust; Technology Adoption; Multinational Firms and Management;

  Citation:

  Bloom, Nicholas, Raffaella Sadun, and John Van Reenen. "The Organization of Firms Across Countries." Quarterly Journal of Economics 127, no. 4 (November 2012). (Slides from 2008, Harvard Business School Working Paper, No. 12-005, August 2011.)

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• Article | American Economic Review | February 2012

  Americans Do IT Better: US Multinationals and the Productivity Miracle

  Nicholas Bloom, Raffaella Sadun and John Van Reenen

  US productivity growth accelerated after 1995 (unlike Europe's), particularly in sectors that intensively use information technologies (IT). Using two new micro panel datasets we show that US multinationals operating in Europe also experienced a "productivity miracle." US multinationals obtained higher productivity from IT than non-US multinationals, particularly in the same sectors responsible for the US productivity acceleration. Furthermore, establishments taken over by US multinationals (but not by non-US multinationals) increased the productivity of their IT. Combining pan-European firm-level IT data with our management practices survey, we find that the US IT related productivity advantage is primarily due to its tougher "people management" practices.

  Keywords: IT productivity; American IT productivity; Information Technology; Performance Productivity; Multinational Firms and Management; Management Practices and Processes; United States; Europe;

  Citation:

  Bloom, Nicholas, Raffaella Sadun, and John Van Reenen. "Americans Do IT Better: US Multinationals and the Productivity Miracle." American Economic Review 102, no. 1 (February 2012): 167–201. (Slides; Summary; The Economist; Financial Times; New York Times.)

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