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2015 | OriginalPaper | Chapter

8. How Does the Market Value Management Practices of Japanese Firms? Using Management Practice Survey Data

Authors : Atsushi Kawakami, Shigeru Asaba

Published in: Intangibles, Market Failure and Innovation Performance

Publisher: Springer International Publishing

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Abstract

This paper examines the extent to which firm’s management practices are valued in the marketplace using the data of interview survey. First, we divide a firm’s market value into its tangible and intangible assets, and further decompose the intangible asset value into the components attributable to advertising, to R&D, and to management practices. We find that the component attributable to management practices is much smaller than the components attributable to R&D or to advertising. We also find that among various management practices, human resource management has a significantly positive impact on Tobin’s q. Some of organizational management variables, however, have significantly negative impacts on Tobin’s q, contrary to the findings of Bloom and Van Reenen (Quarterly Journal of Economics 122:1341–1408, 2007; Journal of Economic Perspectives 24:203–224, 2010) and Bloom et al. (Academy of Management Perspectives 26:12–33, 2012), to which we referred when we conducted interview survey. Then, we further explore the organizational management practice variables to understand why they do not have significantly positive impacts on Tobin’s q. The finer analysis finds that many characteristics of management practices, which are supposed to increase market value of the firms, actually have no significant impact or a negative impact on Tobin’s q. The results suggest that information sharing and coordination within a unit or a team increase the value, while disclosing information and coordinating across units decrease the value. The results also suggest that quick decision making has different impacts on firm’s market value depending upon the contexts. Speedy decision making increases the value in case of new business development, while consultation with the people concerned increases firm’s market value in case of closing the existing business. The different results of this study from the existing ones may suggest that good management practices are different among countries.

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previous chapter Has the Management Quality in Korean Firms Caught Up with That in Japanese Firms? An Empirical Study Using Interview Surveys
next chapter Intangible Assets and a Theory of Heterogeneous Firms
Appendix
Available only for authorised users
Footnotes
1
As to computerized information, Brynjolfsson and Hitt (1995), for example, examined the relationship between IT investment and productivity. Many management scholars have examined the impact of innovative property or technological capability on firm performance (Argyres 1996; Helfat 1994, 1997; Henderson and Cockburn 1994).
 
2
Human and organizational capital has been studied not in economics but in the field of management.
 
3
Miyagawa et al. (2012) is an exception. They evaluate economic competence using the data on labor costs and expense of organizational reform.
 
4
We asked the research firms to conduct the interviews. Examining the results of the pilot interviews, we discuss with them on how to interview and score the answers.
 
5
The number of the firms we interviewed is 277 for the first interview and 130 for the second interview. Among them, we found two duplicates and three unavailable firm observations, and consequently, we use 402 firm observations.
 
6
Miyagawa et al. (2010) describe the scoring system of this interview survey in more detail.
 
7
Other than financial-market based estimation, Simon and Sullivan (1993) pointed out five techniques to measure brand equity: estimation based on the conditions of acquisition and divestment, based on the price premium commanded by a product, based on the brand name’s influence on customer evaluation, based on brand replacement cost, and based on a brand-earnings multiplier.
 
8
In general, the market value of the firm can be considered a function of the tangible and intangible asset value, and can be represented as MV = G(V t, V i ). If any interaction between the tangible assets and the intangible assets is expressed by the interaction term between V t and V i , the market value can be represented as MV = V t  + V i  + V t  * V i. Then, we obtain q = (MV/V t ) = 1 + ((1 + V t )/V t ) * V i . While the coefficient of V i is different from that in the model without considering the interaction effect into account, we can estimate the impact of various factors on the intangible asset value of the firm in the same regression. Moreover, when we decompose the three kinds of the intangible asset values using the coefficient estimated by the model with the interaction, the calculated intangible assets value is not V i /V t , but ((1 + V t )/V t ) * V i .
 
9
The depreciation rate of building is 0.047, structure is 0.0564, machinery is 0.09489, ship is 0.1470, vehicle is 0.1470 and tool is 0.08838.
 
10
As to the questions and sub-questions of organizational capital, see Appendix.
 
11
For this question, there are no negative responses to the first sub-question (score is 2). As a result, the dummy variables in model (13-1) are Score3_D and Score4_D, and that in either model of (13-2) or (13-3) is Score4_D only, but in model (13-3), the observations with score 1 are dropped, while in model (13-2), they are not dropped.
 
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Metadata
Title
How Does the Market Value Management Practices of Japanese Firms? Using Management Practice Survey Data
Authors
Atsushi Kawakami
Shigeru Asaba
Copyright Year
2015
Book
Intangibles, Market Failure and Innovation Performance

Print ISBN: 978-3-319-07532-7

Electronic ISBN: 978-3-319-07533-4

Copyright Year: 2015

DOI
https://doi.org/10.1007/978-3-319-07533-4_8

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