New Approaches to Measuring Management and Firm Organization

The last three decades have witnessed an explosion of theoretical work on the organization of firms (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 Haltiwanger and 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