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Management Matters

Management Matters. February 2nd, 2009 Joint with Michelle Alexopoulos. Canadian Productivity Lags the US. Source: Rao , Tang, and Wang (2008); Industry Canada. Possible Sources of TFP Differences. Technology and Human Capital Science and Engineering Capability R&D incentives

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Management Matters

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  1. Management Matters February 2nd, 2009 Joint with Michelle Alexopoulos

  2. Canadian Productivity Lags the US Source: Rao, Tang, and Wang (2008); Industry Canada.

  3. Possible Sources of TFP Differences • Technology and Human Capital • Science and Engineering Capability • R&D incentives • Efficiencies • Distortionary policies • Industrial structure • Organizational Capability

  4. Is Intangible Channel Important? • Go over the Weil (2009) thought experiment: • TFP = efficiency x technology • At US TFP growth rate of 0.66%, even being a decade behind the US technology would mean a relative TFP of only 0.94, but we have 0.75 value • Thus, must be efficiency difference

  5. Could Managerial Skills be Important? • Differences in formal education of business leaders between Canada and US: • 50% of Canadian tech. company managers are S&E compared to the 43% in US • 30% have post-secondary degrees, compared to 50% • Proportion of top-100 Canadian firms with MBAs is 50% higher in the US

  6. Could Managerial Skills be Important?

  7. Could Managerial Skills be Important?

  8. Could Managerial Skills be Important?

  9. Managerial Skills Channel • Production Efficiencies • Work rules • Team structures • Morale • Coordination Efficiencies • Multi-plant problem • Information transmission

  10. Measurement Issues • Current Research (all case studies) • Specific management techniques (TQM, Quality Circles, BPR) and specific firm performance (ROA or ROE) • Possession of certain degrees and firm performance following US telecom. deregulation • Business and Economics do far better than science and engineering (in sense of "strategic ability") • Gap in Literature • Aggregate effects potentially quite different • General equilibrium feedbacks (diminishing returns, factor market connections, industrial structure) • Need an aggregate measure of "managerial skill"

  11. Source: Author’s calculations from Business Source Premier online database. Bibliometric Measures

  12. Bibliometric Measures • Problem: results sensitive to database choice

  13. Library of Congress Measure

  14. LOC Book Counts • Library of Congress Catalogue Records for Management-Related Items might be such a measure: • Largest book database • Stardardized LOC Classification System • Profit motive suggests publication dates close to moments of high interest in a subject (new technique innovation)

  15. Does LOC Do Well?

  16. The Data • 1929-2002 LOC Catalogue (manually download/manipulated ….. *sigh*) • Mainly HD, HF, T, and TS classes • TFP series calculated in standard Solow-residual fashion from BEA and Global Insight databases (split sole-proprietor income proportional to aggregate labour/capital split)

  17. Empirical Specification • Vector Auto-Regressions:

  18. Regression Results • 10% increase in new management titles associated with 0.6% increase in TFP • Perspective: roughly $80 billion in first year

  19. Variance Decompositions

  20. Results Summary • Endogeneity Problems? • None of the results hold for drama, music, history, fiction books (or any other category we attempted). • Suggests reverse causation less of a concern? • Omitted Variables? • Am I missing something?

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