Diane Coyle — Management as a productive resource

The economic theory of "the firm" (representative firm) assumes homogeneity that may not be there, which widely differing results in output and productivity suggests in the case.

I’ve been browsing through Edith Penrose’s Theory of the Growth of the Firm, having read the biography by Angela Penrose, No Ordinary Woman. Published in 1959, it is an interesting narrative approach to the dynamics of individual firms, with plentiful examples from case studies. One can see that it was heading in a very different direction methodologically from mainstream economics, and hence why Penrose was taken up by business schools instead.… 

All of this reminded me very much of the recent World Management Survey work by Nick Bloom, John Van Reenen and colleagues looking at the importance of management quality for firm productivity. They write: “Economists have long puzzled over the astounding differences in productivity between firms and countries. In this paper, we present evidence on a possible explanation for persistent differences in productivity at the firm and the national level — namely, that such differences largely reflect variations in management practices.” Maybe Penrose was less puzzled than many.

The Enlightened Economist
Management as a productive resource
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation