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CEP Discussion Paper
Does Competition Raise Productivity Through Improving Management Quality?
John Van Reenen
December 2010
Paper No' CEPDP1036:
Full Paper (pdf)

JEL Classification: L2; M2; O32; O33

Tags: management; productivity; organization

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.