Patterns observed in the WMS data suggest that management is important in accounting for the large differences in cross-country total factor productivity (TFP). Bloom, Sadun, and Van Reenen (2016) estimate that management accounts for (on average) a quarter of the TFP gaps between the United States and other countries. To do this they use: (i) the size-weighted average management scores by country, (ii) an average treatment effect of a 10 percent increase in TFP from a one standard deviation increase in management; and (iii) the cross-country TFP differences from Jones and Romer (2010). For some southern European countries such as Portugal and Italy, management accounts for half of the TFP gap with the United States, whereas for other nations such as Japan and Sweden, the fraction is only one-tenth.
Management also potentially accounts for a great deal of the TFP spread within countries. In the United States and the United Kingdom, they find that about a third of the gap between high-performing firms (those at the 90th percentile) and low performing firms (those at the 105h percentile) in TFP can be related to management practices.
These estimates are crude, and highlight the importance of many non-management issues in TFP; yet, they do imply that management is potentially important in both quantitative and qualitative respects when it comes to understanding the forces that account for TFP differences between and within countries.
