Does Competition Raise Productivity Through Improving Management Quality

Published on May 1, 2011in International Journal of Industrial Organization0.96
· DOI :10.1016/j.ijindorg.2011.02.001
John Van Reenan61
Estimated H-index: 61
(Centre for Economic Performance)
A classic question in industrial organization is whether competition raises productivity and if so, through what mechanism? I discuss recent empirical evidence from both large-scale databases and specific industries which suggests that tougher competition does indeed raise productivity and one of the main mechanisms is through improving management practices. To establish this, I report on new research seeking to quantify management. I relate this to theoretical perspectives on the economics of competition and management, arguing that management should be seen at least in part as a transferable technology. A range of recent econometric studies suggest that (i) competition increases management quality and (ii) improved management quality boosts productivity.
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