Wednesday, January 21, 2009

Modern Management: Good for the Environment or Just Hot Air?

This paper is closely related to a body of work currently ongoing at the University of Birmingham. This is clearly an excellent paper on this subject.

Modern Management: Good for the Environment or Just Hot Air?

Nicholas Bloom, Christos Genakos, Ralf Martin and Raffaella Sadun


We use an innovative methodology to measure management practices in over 300 manufacturing firms in the UK. We then match this management data to production and energy usage information for establishments owned by these firms. We find that establishments in better managed firms are significantly less energy intensive. They use less energy per unit of output, and also in relation to other factor inputs. This is quantitatively substantial: going from the 25th to the 75th percentile of
management practices is associated with a 17.4% reduction in energy intensity. This negative relationship is robust to a variety of controls for industry, location, technology and other factor inputs. Better managed firms are also significantly more productive. One interpretation of these results is that well managed firms are adopting modern lean manufacturing practices, which allows them to increase
productivity by using energy more efficiently. This suggests that improving the management practices of manufacturing firms may help to reduce greenhouse gas emissions. Keywords: management, energy efficiency, energy intensity and productivity

JEL Classifications: L2, M2, O32, O33, Q40, Q50

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