Person:

Sadun, Raffaella

We exploit a unique combination of administrative sources and survey data to study the match between firms and managers. The data include manager characteristics, such as risk aversion and talent; firm characteristics, such as ownership; detailed measures of managerial practices relative to incentives, dismissals, and promotions; and measurable outcomes, for the firm and for the manager. A parsimonious model of matching and incentive provision generates an array of implications that can be tested with our data. Our contribution is twofold. We disentangle the role of risk aversion and talent in determining how firms select and motivate managers. In particular, risk-averse managers are matched with firms that offer low-powered contracts. We also show that empirical findings linking governance, incentives, and performance, which are typically observed in isolation, can instead be interpreted within a simple unified matching framework.

Regulations aimed at curbing the entry of large retail stores have been introduced in many countries to protect independent retailers. Analyzing a planning reform launched in the United Kingdom in the 1990s, I show that independent retailers were actually harmed by the creation of entry barriers against large stores. Instead of simply reducing the number of new large stores entering a market, the entry barriers created the incentive for large retail chains to invest in smaller and more centrally located formats, which competed more directly with independents and accelerated their decline. Overall, these findings suggest that restricting the entry of large stores does not necessarily lead to a world with fewer stores, but one with different stores, with uncertain competitive effects on independent retailers.

Using an innovative survey measure of management practices on over 15,000 firms, we find private equity firms are better managed than government, family, and privately owned firms, and have similar management to publicly listed firms. This is true both in developed and developing countries. Looking at management practices in detail we find that private equity owned firms have strong people management practices (hiring, firing, pay, and promotions), but even stronger monitoring management practices (lean manufacturing, continuous improvement, and monitoring). Plant managers working in private equity owned firms also report greater autonomy from headquarters over sales, marketing, and new product introduction.

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.

We examine methods used to survey firms on their management and organizational practices. We contrast the strengths and weaknesses of "open-ended questions" (e.g., World Management Survey) with "closed questions" (e.g., Management and Organizational Practices Surveys). For this type of data, open-ended questions give higher quality responses but are more costly than closed question–based surveys.

We develop an incomplete-contracts model to jointly study firm boundaries and the allocation of decision rights within them. Integration has an option value: it gives firm owners authority to delegate or centralize decision rights, depending on who can best solve problems that may arise in the course of an uncertain production process. To examine the evidence, we construct measures of vertical integration and delegation for thousands of firms in different countries and industries. In line with the model’s predictions, we find that input value and supplier uncertainty play a key role in shaping both integration and delegation choices.

National policies to improve health care quality have largely focused on clinical provider outcomes and, more recently, payment reform. Yet the association between hospital leadership and quality, although crucial to driving quality improvement, has not been explored in depth. We collected data from surveys of nationally representative groups of hospitals in the United States and England to examine the relationships among hospital boards, management practices of front-line managers, and the quality of care delivered. First, we found that hospitals with more effective management practices provided higher-quality care. Second, higher-rated hospital boards had superior performance by hospital management staff. Finally, we identified two signatures of high-performing hospital boards and management practice. Hospitals with boards that paid greater attention to clinical quality had management that better monitored quality performance. Similarly, we found that hospitals with boards that used clinical quality metrics more effectively had higher performance by hospital management staff on target setting and operations. These findings help increase understanding of the dynamics among boards, front-line management, and quality of care and could provide new targets for improving care delivery.

Internal communication has been a central theme in organizational economics, as employee collaboration provides insight into the structure of firms. Use of electronic communications data can be transformational for organizational economics, as these data provide a standardized way to measure organizational communication patterns and to determine the connection between these patterns and firm performance. We discuss the value of data that capture patterns of employee interactions, the benefits and risks associated with the use of electronic communication data (email and meetings) as empirical proxies for these collaboration patterns, and the research possibilities for studies across larger sets of firms.

We present evidence on the labor supply of CEOs and on whether family and professional CEOs differ on this dimension. We do so through a new survey instrument that allows us to codify CEOs’ diaries in a detailed and comparable fashion and to build a bottom-up measure of CEO labor supply. The comparison of 1,114 family and professional CEOs reveals that family CEOs work 9% fewer hours relative to professional CEOs. Hours worked are positively correlated with firm performance, and differences between family and non-family CEOs account for approximately 18% of the performance gap between family and non-family firms. We investigate the sources of the differences in CEO labor supply across governance types by exploiting firm and industry heterogeneity and quasi-exogenous meteorological and sport events. The evidence suggests that family CEOs value—or can pursue—leisure activities relatively more than professional CEOs. Layperson summary

Over the last decade the World Management Survey (WMS) has collected firm-level management practices data across multiple sectors and countries. We developed the survey to try to explain the large and persistent TFP differences across firms and countries. This review paper discusses what has been learned empirically and theoretically from the WMS and other recent work on management practices. Our preliminary results suggest that about a quarter of cross-country and within-country TFP gaps can be accounted for by management practices. Management seems to matter both qualitatively and quantitatively. Competition, governance, human capital, and informational frictions help account for the variation in management.