CEP Discussion Paper No 969 February 2010 New Approaches to Measuring Management and Firm Organization Nick Bloom and John Van Reenen
Abstract We detail the methodology that we have been using to quantify managerial and organizational practices across firms and countries in recent years. This has been used in many pieces of research at the Centre for Economic Performance. Wediscuss the pros and cons of such survey tools, describing how our methods lie between the traditional surveys used by economists and the case studies more common in other parts of social science. JEL Classifications: L2, M2, O32, O33 Keywords: surveys, data, organization, management
This paper was produced as part of the Centre’s Productivity and Innovation Programme. The Centre for EconomicPerformance is financed by the Economic and Social Research Council.
Acknowledgements We thank our discussant Ron Jarmin, our long time partners Stephen Dorgan and John Dowdy, our research partners Raffaella Sadun, Christos Genakos and Rebecca Homkes and our 100 management interviewers over the last 10 years. The authors gratefully acknowledge Stiftung Stahlwerk Georgsmarienhuette, the ESRC,Anglo German Foundation, Aim and the Kauffman Foundation for funding this research. Organizational support was provided by the Centre for Economic Performance. Nick Bloom is an Associate at the Centre for Economic Performance, London School of Economics. He is also Assistant Professor, Department of Economics, Stanford University. John Van Reenen is Director of the Centre for Economic Performanceand Professor of Economics, LSE.
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New approaches to surveying organizations Nick Bloom and John Van Reenen* The last three decades have witnessed an explosion of theoretical work on the organization offirms (Robert Gibbons and John Roberts, 2009). In parallel, there has been a massive increase in access to micro data which has revealed huge dispersions in productivity. For example, within narrow industries like cement, oak flooring, and block-ice the total factor productivity of plants at the 90th percentile is about twice that of those at the 10th percentile. (Lucia Foster, John Haltiwangerand Chad Syversson, 2008). Unfortunately, analyzing to what extent this heterogeneity in productivity is due to management and organizational practices, unmeasured inputs, or other technologies has been held back by a lack of data. National statistical agencies do not usually collect data on the internal organization of companies and nor do firms report this in their accounts. Recently, however,social scientists have been starting to fill this gap by working closely with small numbers of individual firms (e.g. the “Insider Econometrics” approach described in Kathryn Shaw (forthcoming)) or covering wide cross sections of firms (e.g. Nicholas Bloom, Raffaella Sadun and John Van Reenen (2009)). In this paper we describe some of the tools of this research, particularly Bloom and Van Reenen(2007) - henceforth BVR – for measuring management and organizational practices.1 I. MINIMIZING SURVEY BIAS A key challenge in surveys is to obtain unbiased responses to questions. Here we outline a series of steps we have found useful, first concentrating on reducing the bias of the respondent (the manager) and then on reducing the bias of the interviewer (typically an MBA student).