Journal Article Evaluation

Journal 1: Management in Production: From Unobserved to Observed

Structure
The study’s main intention was to account the observed management practices
in terms of the estimation of the production function. It sought to determine if
productivity estimates were good proxies for unobserved management. Throughout the
study, they employed Bloom and Van Reenen’s management data to assess the
empirical usefulness of productivity estimates as proxies for management.
The study used an observable model management practice where the
researchers permitted the model directly and indirectly affect the output by manipulating
the input productivity. Consequently, a semiparametric smooth coefficient (SPSC)
model resulted from this formulation that allows all coefficients to be nonparametric
functions of management. The researchers also discovered that the use of estimated
unobserved inefficiency scores aren’t highly correlated to observed management. They
found out that the management affects output both directly and indirectly factor of
production like the productive effect of management is non-neutral. The study found out
that the indirect effect of conventional inputs may vary with management.
Results show that fixed effects and inefficiency scores, popular proxies, had a
correlation with observed management practices. Result were presented and showed
that there was indeed a correlation but it was weak. Management also explains that only
a portion of the proxies variances. When asked the question whether the influence of
management was neutral or monotonic, results turned-out negative and rejected the
assumptions. The proxies do not quantify management practices well.
Awareness of Current Debate
According to Bloom and Van Reenen in several of their studies, there is a
growing literature that studies empirically the impact of management on productivity.
The importance of management has long been recognized in the literature on
production, productivity and efficiency though its importance is not yet fully recognized
in the mainstream economics literature which argues that there is no need to treat
management separately because competition would weed out bad management.
However, a study by Chad Syverson entitled “What Determines Productivity?”
contests this and counters that there is no empirical evidence for such a hypothesis.
Large numbers of studies have found that differences in firm performance continue over
time and is likely caused by the inability to adopt best management practices.