Management practices and business labour productivity

This study examines the impact of management practices on business labour productivity, taking into account the externalities of intangible capital endowment of the country in which the firms are located. Management practices are also analysed to see which are more likely to explain productivity differences between firms. For this purpose, a sample of European firms from France, Germany, Greece, Portugal, Spain and the United Kingdom is used. Data of management practices comes from the World Management Survey. The main empirical results show that management practices have a strong positive and economically significant impact on the labour productivity of firms. Differences in the labour productivity of firms and therefore, of countries can be explained, in part, by differences in the score given for their management practices and by differences in local intangible capital endowment. Finally, incentives management and target setting prove to be the most relevant management practices in improving firms' labour productivity.