Raffaella Sadun and John Van Reenen have written a nice summary (10 pages) of their paper entitled "It ain't what you do, it's the way that you do I.T. - Testing explanations of productivity growth using U.S. affiliates." Here is an even shorter summary for the busy reader[1]:Research out today shows productivity levels are similar in US companies based here to those in the US. The research goes a long way to proving that the US productivity miracle of the past 10 years is not explained by the US business environment being better; rather US companies are simply better at using computers and other technology to drive productivity higher. Remarkably, the effect explains most of the gap in productivity growth between the US and the UK over the past decade. US output per hour grew by 2.5 per cent a year on average between 1995 and 2004 compared with 1.5 per cent in the 15 members of EU before enlargement. Further work by research institutions such as the National Institute of Economic and Social Research and the US Conference Board were able to prove that the difference was accounted for almost exclusively in sectors of the economy that used technology intensively. Retail, wholesale and finance sectors were most important. Using detailed data held by the Office for National Statistics about the performance of more than 7,000 private sector establishments in Britain, the CEP researchers were able to demonstrate that US-owned establishments in the UK managed to increase productivity pretty much like their parent companies at home. The detailed analysis confirmed that the big productivity differences were in industries that used IT heavily. US-owned multinationals in the UK, such as Asda or Starbucks, got more out their workforce than other multinationals, such as Tesco, and much more than purely domestic companies. US companies were managed differently in two respects. They had more “aggressive” human resources practices, promoting good performers quickly and getting rid of weaker performers and they devolved greater managerial autonomy in the implementation of IT systems to local plants rather than trying to run everything centrally.
[1] Use of technology key to higher productivity, FT.com
Mahalanobis - am 2005-12-27 04:06 - Rubrik: economics
Mike Linksvayer (anonymous) meinte am 27. Dec, 20:25:
business environment still seems important
Page 8-9 of the summary:
there are regulatory and cultural constraints to adopting US businessSounds like the differences are substantially enabled by a better business environment in the U.S.
practices in Europe. For example, removing poorly performing workers is extremely difficult
especially for longer tenured workers in larger firms. This is due to strong labour regulation
protecting workers against dismissal. These enable managers and workers to block changes
that may threaten their vested interests. Rapid promotion of very talented workers is also
problematic as young employees are often expected to go through extensive training and
unions prefer tenure based promotion systems to those based on individual performance. In
the US, change often occurs due to the entry of new firms and plants but this is difficult to
bring about while there are entry regulations protecting incumbents against the threat of new
entry.
All of these barriers should not be over-emphasised however, as US multinationalsPerhaps U.S. multinational performance in Europe should not be over-emphasized--the successful practices were presumably developed in the U.S. business environment.
appear to be able to do as well in the European outlets as they do back home (Starbucks,
McDonalds, etc).
dsquared (anonymous) meinte am 30. Dec, 21:48:
Asda better than Tesco???
I am only a humble stockbroker, but I would suggest that if the conclusion of this NIESR report is built on the proposition that ASDA is a better retailer than Tesco, then it is built on sand. I also dispute whether Walmart really delegates more autonomy to local plants than Carrefour, and I know quite a bit about both companies.(related to which, there is a good John Kay bit on the fact that it is probably no coincidence that the two industries which account for the majority of the US/EU productivity differential are also the two industries in which productivity is most difficult to measure. In both financial services and retailing, it is very easy to mistake "lower value-added" for "higher productivity"; a Bond Street boutique could certainly increase its measured productivity by getting rid of the dollybirds and the free coffee, for example)
