Management and Firm Dynamism

Raffaella Sadun, Rachel Schuh, Jonathan Hartley, John van Reenen and Nicholas Bloom

No 20602, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We show better-managed firms are more dynamic in plant acquisitions, disposals, openings and closings in U.S. Census and international data. Better-managed firms also birth better-managed plants and improve the performance of the plants they acquire. To explain these findings we build a model with two key elements. First, management is a combination of firm-level management ability (e.g. CEO quality), which can be transferred to all plants, and plant-level management practices, which can be changed through intangible investment (e.g. consulting or training). Second, management both raises productivity and also reduces the operational costs of dynamism: buying, selling, opening and closing plants. We structurally estimate the model on Census microdata, fitting our key dynamic moments, and then use it to establish three additional results. First, mergers and acquisitions raise economy-wide management and productivity by reallocating plants to firms with higher management ability. Banning M&A would depress GDP and management by about 15%. Second, greater product market competition improves both management and productivity by reallocating away from badly managed plants. Finally, management practices account for about 20% of the cross-country productivity differences with the US.

Keywords: Management; Mergers and acquisitions; Productivity; Competition (search for similar items in EconPapers)
JEL-codes: L2 M2 (search for similar items in EconPapers)
Date: 2025-08
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP20602 (application/pdf)

Related works:
Working Paper: Management and firm dynamism (2025)
Working Paper: Management and Firm Dynamism (2025)
Working Paper: Management and Firm Dynamism (2025)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:20602

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP20602

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().