Nick Bloom, Labor Topics, Spring 2009 LABOR TOPICS Nick Bloom Management and organizations

Nick Bloom, Labor Topics, Spring 2009 Thoughts on Bloom and Van Reenen Management and family firms Organization and ICT

Nick Bloom, Labor Topics, Spring 2009 Obviously my paper so I’m not impartial…but here’s my view on what to learn from this The operational ideas in this are that: You can use good survey design to minimize bias Double-blind surveys, facilitated by open questions Collection of background data as “noise controls” Build self-evaluation into the survey process Independent resurvey of firms Matching to company accounts Much higher response rate to well executed surveys Use the telephone/in-person (not internet, postal) Using high-skilled people Ideally use endorsements Can pay people (we didn’t) but needs IRB clearance

Nick Bloom, Labor Topics, Spring 2009 Bad stuff, and why this was published Causality – we showed nothing in the performance regressions & were weak on the competition/family results Sample size – reasonable but not great at 150 per country Coverage – manufacturing only Bias – still could be worried about things like the “happy manager problem” Despite this was published and (so far) been will cited: innovative methodology Very little other work on management (good topic)

Nick Bloom, Labor Topics, Spring 2009 Extensions Use survey methodology to collect data from various sources: Firms in other countries/industries Stores (Safeway data) Schools and hospitals Individuals Can ask a variety of questions – we have been looking at management, organizations and culture As in Bertrand and Mullainathan important to think about survey design very carefully up front – piloting

Nick Bloom, Labor Topics, Spring 2009 Thoughts on Bloom and Van Reenen Management and family firms Organization and ICT

Nick Bloom, Labor Topics, Spring 2009 Talk about 2 recent family firms papers – both will cited for their vintage

Nick Bloom, Labor Topics, Spring 2009 “Inside the family firm: the role of families in succession decisions and performance” Quarterly Journal of Economics, 2007 Bennedsen, Nielsen, Perez-Gonazlez and Wolfenzon,

Nick Bloom, Labor Topics, Spring 2009 Very nice paper with an ingenious idea, which is incredibly well executed Family hand-down is endogenous, so can not directly estimate the impact of family management Use gender of the first-born child as an instrument Boys more likely to inherit the CEO position Gender of the first-born in exogeneous Finds that the impact of families is even worse that you expect once you control for endogeneity

Nick Bloom, Labor Topics, Spring 2009 What you can learn from this Clever use of a new data set can generate fantastic papers Search around friends, family and other connections to find any new data you can access Typically long process with lots more work - two of the authors a huge amount of hard-work to produce the final dataset But can pay huge dividends - economics is increasingly open to data from different countries

Nick Bloom, Labor Topics, Spring 2009 “Inherited control and firm performance” American Economic Review, 2007 Francisco Perez-Gonalez

Nick Bloom, Labor Topics, Spring 2009 Another family-firm paper which I think is also very clever Perez-Gonzalez has a paper in the AER in 2006 called “Inherited control and firm performance” Looks at the impact of the announcement that a firms founding CEO will step-down Big rise if the next CEO is not a family-member Big drop if the next CEO is a family member (e.g. son) Drop driven by those from “non-selective colleges” This was from Perez-Gonzalez PhD thesis but was not his main paper (a 2 nd year paper I think) So for empirical work worth pushing analysis as hard to tell where this will eventually end up!

Nick Bloom, Labor Topics, Spring 2009 Thoughts on Bloom and Van Reenen Management and family firms Organization and ICT

Nick Bloom, Labor Topics, Spring 2009 Tim Bresnahan, Erik Brynolfsson and Lorin Hitt “Information technology, workplace organization and the demand for skilled labor: firm-level evidence” Quarterly Journal of Economics (2002)

Nick Bloom, Labor Topics, Spring 2009 Provided first good econometric evidence on the link between returns to IT and organization Collected new data on IT use and organization in firms, to go beyond ‘case-studies’ Estimated the direct and interaction effects in a panel of firms: IT and organizational change are complementary with each other (the big result, in hindsight) These are both skill biased (“skilled-biased technical change” was a big late 1990s / early 2000s research theme) A very important paper. Provided the first good evidence on IT and organizational complementarities – something that appears to play a major role in explaining US growth Interestingly, the identification – like Bloom and Van Reenen (2007) - are actually pretty weak, so sold more on data & idea.

Nick Bloom, Labor Topics, Spring 2009 Incredibly well cited paper for its vintage…

Nick Bloom, Labor Topics, Spring 2009 They first collected new data on IT and organizations Ran a telephone survey on organisational structure and skills on a sample of 780 firms which they had both IT and accounts data for 380 of these firms responded – providing their empirical data of matched IT, organization and accounting information There are some issues with the data: Sample selection (IT and Org responding firms) Cross-sectional (organization and skills data) No natural identification in data (no big experiment, discontinuity, treatment group etc….)

Nick Bloom, Labor Topics, Spring 2009 Test complementarity estimating correlations and production function results Assume IT and O are two factors of production Q=F(IT,O,X) where X is all other factors Complementarity of IT and O in production assumes the following ∂ 2 Q/∂IT∂O > 0 (like supermodularity) Examining this typically involves testing for two things: (1) Estimating the interaction directly in (some second-order Taylor expansion of) the production function, for example β 3 >0 in: log(Q) = β 0 + β 1 log(IT) + β 2 log(O) + β 3 log(IT)×log(O) +…… (2) Exploiting the implication of optimality (FOCs), which implies IT and O should be correlated in levels, for example β 1 >0 in: log(IT) = β 0 + β 1 log(O) + …..

Nick Bloom, Labor Topics, Spring 2009 BBH report evidence for complementarities between IT and decentralization in the production function

Nick Bloom, Labor Topics, Spring 2009 BBH report evidence for correlations of IT factor intensity and decentralization

Nick Bloom, Labor Topics, Spring 2009 Conclusion Paper which has had a huge impact from being ‘first to market’ in providing empirical support for a key stylized fact How did they do it – by collecting their own data This is another area for fertile research – collecting new data to build on current data sets (firms, industries or even countries)