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The Effects of Management Practices on Total Factor Productivity: New evidence based on Chinese employer - employee survey (CEES)

November 7, 2018
Cheng Hong, Wang Mingming, Li Tang

Abstract: The issues related to the growth of Total Factor Productivity ( TFP) about the China economy have always been the focus of research in the field of economics at home and abroad.Different from the existing literature,such as the research from the macro perspectives of human capital,R&D innovation and industrial agglomeration. This paper innovatively chose the micro -perspective which is so called management practices and uses the “China Employers - Employees Survey”(CEES) data to manage the management score. A comprehensive empirical analysis of the problem of Total Factor Productivity growth in Chinese enterprises have been detected. For the first time using the internationally recognized and standardized World Management Survey ( WMS) and the scale of the management practices,CEES obtained data on the management practices of 1,084 Chinese firms. The survey shows that compared with the developed countries and regions such as the United States and the European Union,there is still a big gap in the management practices between Chinese firms. The management practices indicators are decomposed into four subdivision dimensions: performance incentives,management operating,targets planning and assessment supervision. The research finds that for the current stage of Chinese firms,they do better in incentives,management operating and inspection,but they are worse in the targets planning,which is the shortcoming of the current overall management practices improvement. On this basis,this paper starts from the enterprise dimension and conducts a robust empirical test on the impact of management practices on the Total Factor Productivity of enterprises. The benchmark regression results show that the worse performance of management practice is the important shortcoming which restricts the growth of China's Total Factor Productivity. Under the premise of other factors which are controlled,the 2015 enterprise management practices score is used as the explanatory variable. We have found that the management score increases by 10%,the Total Factor Productivity ( TFP) of the enterprise will increase by 1.72% ~ 2.92%,which means the management practices are improving the growth of Total Factor Productivity( TFP) . In addition,in the part of the robustness test,we used the 2010 firms’management practices score as the explanatory variable,and the regression results basically support the above conclusions,which also shows that management practices has a long - term driving effect on Total Factor Productivity ( TFP) . On this basis,this paper uses the general practice of mediation effect to empirically analyze the impact mechanism of management practices on total Factor Productivity ( TFP) . The results of the regression show that the use of high - quality machinery and equipment,the introduction of management information systems and the improvement of the frequency of R&D and development exchanges are the important mechanisms for management practices to affect the growth of Total Factor Productivity ( TFP) . In conclusion,we not only prove the management practices have improved the growth of Total Factor Productivity ( TFP) ,we also found the mediating effects between management practices and Total Factor Productivity ( TFP) . In other words,we have made the contribution to the management practices detection of China,and the outcomes can be compared with the other countries or areas in the world.


Keywords: Total Factor Productivity; Management Efficiency; Influence Mechanism