nach oben

Empirical Economics

Erschienen in:

28.09.2020

Measuring the effect of management on production: a two-tier stochastic frontier approach

verfasst von: Alecos Papadopoulos

Erschienen in: Empirical Economics | Ausgabe 6/2021

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

We revisit the production frontier of a firm, and we examine the effects that the firm’s management has on output. In order to estimate these effects using a cross-sectional sample while avoiding the costly requirement of obtaining data on management as a production factor, we develop a two-tier stochastic frontier model where management is treated as a latent variable. The model is consistent with the microeconomic theory of the firm, and it can estimate the effect of management on the output of a firm in monetary terms from different angles, separately from inefficiency. The approach can thus contribute to the cost–benefit analysis related to the management system of a company, and it can facilitate research related to management pay and be used in studies of the determinants of management performance. We also present an empirical application, where we find that the estimates from our latent-variable model align with the results obtained when we use the World Management Survey scores that provide a measure of management.

Vorheriger Artikel India’s calorie consumption puzzle: insights from the stochastic cost frontier analysis of calorie purchases

Nächster Artikel Estimation of semi- and nonparametric stochastic frontier models with endogenous regressors

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

We draw here also from Papadopoulos (2020b) that surveys 70 years of related empirical research.

Such a link between human capital and management quality has been found in Bender et al. (2018). Brea-Solís et al. (2015) stress the distinction between the designed management system and its implementation, or “how the levers are pulled” in their words.

Bloom et al. (2013a, p.21) define “more structured” as “more specific, formal, frequent or explicit.”

See EU’s “Annual report on European SMEs 2016/2017” https://doi.org/10.2873/742338. For a UK survey that targets management practices in SMEs, see Forth and Bryson (2019).

The author was referring to an unpublished MS thesis by R.W. Hardcopf in 1956 at Iowa State University. I take here the opportunity to thank Jeffrey Kushkowski, Business and Economics Librarian at the Iowa State University, for his assistance regarding obscure documents in his library.

The single-firm focus has the flavor of Insider econometrics.

See Sickles and Zelenyuk (2019, ch.4) for the relations between these concepts.

For a fascinating account of how leadership and the business model of a firm contributed to its long-term success, see the case study in Brea-Solís et al. (2015).

See Bloom and Van Reenen (2007, (2010) and Bloom et al. (2014a) for discussions about the heterogeneity of management practices across firms.

Analogous is the “contingency model” in Management science.

Technology as a recipe is not a new metaphor, see for example O’Donnell (2016), Kerstens et al. (2019).

See Papadopoulos (2018, ch. 6) and its technical appendix for details.

Tsionas (2015) analyzes in detail a profit-maximizing model with management and arrives at the same conclusion, namely, that economic optimization will result in a level of management below its technically optimal level, if one exists, or in general in a level that will leave some technical efficiency opportunities unrealized.

For a review of the 2TSF framework and its diverse applications see Papadopoulos (2020c).

For a discussion of this issue and an alternative explanation see Almanidis and Sickles (2011).

The full data set is “Manufacturing: 2004-2010 combined survey data (AMP),” freely available at http://worldmanagementsurvey.org/survey-data/download-data/download-survey-data/.

This criticism is also valid for the individual effects panel data model, when one wants to baptize the individual effect as a measure of management.

The two-tier stochastic frontier model was developed for panel data sets in Polachek and Yoon (1996). An alternative methodology is described in Papadopoulos (2020c).

Almanidis P, Sickles R (2011) The skewness problem in stochastic frontier models: fact or fiction? In: Van Keilegom I, Wilson P (eds) Exploring research frontiers in contemporary statistics and econometrics: a festschrift in honor of Leopold Simar. Springer, Berlin

Alvarez A, Arias C (2003) Diseconomies of size with fixed managerial ability. Am J Agric Econ 85(1):134–142CrossRef

Alvarez A, Arias C, Greene W (2005) Accounting for unobservables in production models: management and Inefficiency. Efficiency series Working Paper 07/2005, Department of Economics, University of Oviedo

Barros CP, Couto E, Samagaio A (2014) Management ability, strategy, tactics and team performance. In: Sloan P, Goddard J (eds) Handbook on the economics of professional football. Edward Elgar Publishing, Cheltenham

Battese GE, Coelli TJ (1988) Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data. J Econom 38:387–399CrossRef

Bender S, Bloom N, Card D, Van Reenen J, Wolter S (2018) Management practices, workforce selection, and productivity. J Labor Econ 36(S1):S371–S409CrossRef

Bloom N, Van Reenen J (2007) Measuring and explaining management practices across firms and countries. Q J Econ 122(4):1351–1408CrossRef

Bloom N, Van Reenen J (2010) Why do management practices differ across firms and countries? J Econ Perspect 24(1):203–224CrossRef

Bloom N, Genakos C, Sadun R, Van Reenen J (2012a) Management practices across firms and countries. National Bureau of Economic Research. Working Paper No. w17850

Bloom N, Schweiger H, Van Reenen J (2012b) The land that lean manufacturing forgot? Management practices in transition countries. Econ Trans 20(4):593–635CrossRef

Bloom N, Brynjolfsson E, Foster L, Jarmin RS, Saporta-Eksten I, Van Reenen J (2013a) Management in America. US Census Bureau Center for Economic Studies Paper No. CES-WP-13-01

Bloom N, Eifert B, Mahajan A, McKenzie D, Roberts J (2013b) Does management matter? Evidence from India. Q J Econ 128(1):1–51CrossRef

Bloom N, Lemos R, Sadun R, Scur D, Van Reenen L (2014a) The New Empirical Economics of Management. National Bureau of Economic Research. Working Paper No. w20102

Bloom N, Sadun R, Van Reenen J (2014b) Does management matter in healthcare? Center for Economic Performance and Harvard Business School, Boston, MA

Bloom N, Sadun R, Van Reenen J (2016) Management as a Technology? National Bureau of Economic Research. Working Paper No. w22327

Bloom N, Brynjolfsson E, Foster L, Jarmin R, Patnaik M, Saporta-Eksten I, Van Reenen J (2017) What drives differences in management? National Bureau of Economic Research, Discussion Paper, p w23300

Bowden R (1973) The theory of parametric identification. Econometrica 41(6):1069–1074CrossRef

Brea-Solís H, Casadesus-Masanell R, Grifell-Tatjé E (2015) Business model evaluation: quantifying Walmart’s sources of advantage. Strateg Entrep J 9(1):12–33CrossRef

Broszeit S, Laible MC, Fritsch U, Görg H (2019) Management practices and productivity in Germany. Ger Econ Rev 20(4):e657–e705CrossRef

Brouillette D, Ershov D (2014) Management Practices, Competition, Innovation and the Performance of Enterprises in Canada. Industry Canada. WP 2014-02

Buffington C, Foster L, Jarmin R, Ohlmacher S (2017) The management and organizational practices survey (MOPS): an overview. J Econ Soc Meas 42(1):1–26CrossRef

Dawson P, Dobson S (2002) Managerial efficiency and human capital: an application to English association football. Manag Decis Econ 23(8):471–486CrossRef

Dawson P, Hubbard L (1987) Management and size economies in the England and Wales dairy sector. J Agric Econ 38(1):27–38CrossRef

Delis M, Tsionas M (2018) Measuring management practices. Int J Prod Econ 199:65–77CrossRef

Farrell M (1957) The measurement of production efficiency. J R Stat Soc A 120(3):253–290CrossRef

Ford SA, Shonkwiler JS (1994) The effect of managerial ability on farm financial success. Agric Resour Econ Rev 23(1203–2016–95010):150–157CrossRef

Forth J, Bryson A (2019) Management practices and SME performance. Scott J Political Econ 66(4):527–558CrossRef

Fried H, Lovell C, Schmidt S (eds) (2008) The measurement of productive efficiency and productivity growth. Oxford University Press, Oxford

Fried HO, Lovell CK, Schmidt SS, Yaisawarng S (2002) Accounting for environmental effects and statistical noise in data envelopment analysis. J Prod Anal 17(1–2):157–174CrossRef

Gathon HJ, Pestieau P (1995) Decomposing efficiency into its managerial and its regulatory components: The case of European railways. Eur J Operat Res 80(3):500–507CrossRef

Genakos C (2018) The tale of the two Greeces: some management practice lessons. Manag Decis Econ 39(8):888–896CrossRef

Hoch I (1955) Estimation of production function parameters and testing for efficiency. Report of the Montreal meeting. Econometrica 23(3):325–326

Hoch I (1962) Estimation of production function parameters combining time-series and cross-section data. Econometrica 30(1):34–53CrossRef

Jondrow J, Lovell CAK, Materov IS, Schmidt P (1982) On the estimation of technical efficiency in the stochastic frontier production function model. J Econometr 19(2–3):233–238CrossRef

Jones M (2009) Kumaraswamy’s distribution: a beta-type distribution with some tractability advantages. Stat Methodol 6(1):70–81CrossRef

Kalaitzandonakes NG, Dunn EG (1995) Technical efficiency, managerial ability and farmer education in Guatemalan corn production: A latent variable analysis. Agric Resour Econ Rev 24(4):36–46CrossRef

Kerstens K, O’Donnell C, Van de Woestyne I (2019) Metatechnology frontier and convexity: a restatement. Eur J Operat Res 275(2):780–792CrossRef

Kumbhakar SC, Parmeter CF (2010) Estimation of hedonic price functions with incomplete information. Empir Econ 39(1):1–25CrossRef

Liu S, Sickles R (2020) The agency problem revisited: a structural analysis of managerial productivity and CEO compensation in large US commercial banks. Rice University. RISE WP 20-001

Mäkinen H (2013) Farmers’ managerial thinking and management process effectiveness as factors of financial success on Finnish dairy farms. Agric Food Sci 22(4):452–465CrossRef

Marques RC, Barros CP (2010) Performance of European airports: regulation, ownership and managerial efficiency. Appl Econ Lett 18(1):29–37CrossRef

Massell B (1967a) Elimination of management bias from production functions fitted to cross-section data: a model and an application to African agriculture. Econometrica 35(3–4):495–508CrossRef

Massell BF (1967b) Farm management in peasant agriculture: an empirical study. Food Res Inst Stud 7(1387–2016–116091):205–215

Müller J (1974) On sources of measured technical efficiency: the impact of information. Am J Agric Econ 56(4):730–738CrossRef

Mundlak Y (1961) Empirical production function free of management bias. J Farm Econ 43(1):44–56CrossRef

O’Donnell CJ (2016) Using information about technologies, markets and firm behaviour to decompose a proper productivity index. J Econometr 190(2):328–340CrossRef

Page J (1980) Technical efficiency and economic performance: some evidence from Ghana. Oxford Econ Pap 32(2):319–339CrossRef

Papadopoulos A (2018) The two-tier stochastic frontier framework: theory and applications, models and tools. Ph. D thesis, Athens University of Economics and Business

Papadopoulos A (2020a) Accounting for endogeneity in regression models using Copulas. Submitted manuscript under review

Papadopoulos A (2020b) The effects of management on production: a survey of empirical studies. In: Ray SC, Chambers R, Kumbhakar S (eds) Handbook of Production Economics vol 2, Springer, forthcoming

Papadopoulos A (2020c) The two-tier stochastic frontier framework: Measuring frontiers wherever they may exist. In: Sickles R, Parmeter C (eds) Advances in Efficiency and Productivity Analysis, Springer, forthcoming

Papadopoulos A, Parmeter CF, Kumbhakar S (2020) Modeling dependence in two-tier stochastic frontier models. Submitted manuscript under review

Parmeter CF (2018) Estimation of the two-tiered stochastic frontier model with the scaling property. J Prod Anal 49(1):37–47CrossRef

Patrick GF, Eisgruber LM (1968) The impact of managerial ability and capital structure on growth of the farm firm. Am J Agric Econ 50(3):491–506CrossRef

Polachek S, Yoon B (1987) A two-tiered earnings frontier estimation of employer and employee information in the labor market. Rev Econ Stat 69(2):296–302CrossRef

Polachek SW, Yoon BJ (1996) Panel estimates of a two-tiered earnings frontier. J Appl Econometr 11(2):169–178CrossRef

Rahman MT, Nielsen R, Khan MA, Ankamah-Yeboah I (2020) Impact of management practices and managerial ability on the financial performance of aquaculture farms in Bangladesh. Aquac Econ Manag 24(1):79–101CrossRef

Sickles R, Zelenyuk V (2019) Measurement of productivity and efficiency. Cambridge University Press, CambridgeCrossRef

Sickles RC, Sun K, Triebs T (2020) The optimal use of management. Rice University. RISE WP 20-003

Siebert WS, Zubanov N (2010) Management economics in a large retail company. Manag Sci 56(8):1398–1414CrossRef

Stacy E (1962) A generalization of the gamma distribution. Ann Math Stat 33(3):1187–1192CrossRef

Sumner DA, Leiby JD (1987) An econometric analysis of the effects of human capital on size and growth among dairy farms. Am J Agric Econ 69(2):465–470CrossRef

Torii A (1992) Technical efficiency in Japanese Industries. In: Caves RE (ed) Industrial efficiency in six nations. MIT, Cambridge, pp 31–119

Tran K, Tsionas E (2015) Endogeneity in stochastic frontier models: Copula approach without external instruments. Econ Lett 133:85–88CrossRef

Triebs T, Kumbhakar S (2013) Productivity with general indices of management and technical change. Econ Lett 120(1):18–22CrossRef

Triebs T, Kumbhakar S (2018) Management in production: from unobserved to observed. J Prod Anal 49(2–3):111–121CrossRef

Tsionas E (2015) The role of management in production: theoretical and statistical implications. Manuscript

Wolff FC, Squires D, Guillotreau P (2013) The firm’s management in production: management, firm, and time effects in an Indian ocean tuna fishery. Am J Agric Econ 95(3):547–567CrossRef

Yaron D (1960) Resource allocation for dairy and field crops in the Negev area of Israel. Iowa State University. Ph. D thesis

Titel: Measuring the effect of management on production: a two-tier stochastic frontier approach
verfasst von: Alecos Papadopoulos
Publikationsdatum: 28.09.2020
Verlag: Springer Berlin Heidelberg
Erschienen in: Empirical Economics / Ausgabe 6/2021
Print ISSN: 0377-7332
Elektronische ISSN: 1435-8921
DOI: https://doi.org/10.1007/s00181-020-01946-9

Springer Professional

Abstract

Bitte loggen Sie sich ein, um Zugang zu Ihrer Lizenz zu erhalten.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft"

Springer Professional "Wirtschaft+Technik"

Weitere Artikel der Ausgabe 6/2021

Estimation of semi- and nonparametric stochastic frontier models with endogenous regressors

Persistent and transient inefficiency in adult education

Unrestricted geometric distance functions and the Geometric Young productivity index: an analysis of Indian manufacturing

Applications of efficiency and productivity analysis: editors’ introduction

Predicting recessions with a frontier measure of output gap: an application to Italian economy

Spatial effects of nutrient pollution on drinking water production

Premium Partner