We use an innovative methodology to measure management practices in more than 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 run 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.

“Testing the “Waterbed” effect in Mobile Telephony” (co-authored with Tommaso Valletti, Tanaka Business School, Imperial College) Appendix 

This paper examines the impact of regulatory intervention to lower termination rates of calls from fixed lines to mobile phones. Under quite general conditions of competition, theory suggests that lower termination charges will result in higher prices for mobile subscribers, a phenomenon known as the “waterbed” effect. The waterbed effect has long been hypothesized as a feature of many two-sided markets and especially the mobile network industry. Using a uniquely constructed panel of mobile operators’ prices and profit margins across more than twenty countries over six years, we document empirically the existence and magnitude of this effect. Our results suggest that the waterbed effect is strong, but not full. We also provide evidence that both competition and market saturation, but most importantly their interaction, affect the overall impact of the waterbed effect on prices.

COMPLETED RESEARCH PAPERS

"Risk Taking and Performance in Multistage Tournaments: Evidence from Weightlifting Competitions" (co-authored with Mario Pagliero, University of Turin and Collegio Carlo Alberto) CEP wp NEW

We analyze the impact of interim ranking on the risk taking and performance behaviour of professional athletes participating in international weightlifting competitions. Weightlifting competitions are multistage tournaments with the unique characteristic that the athletes must announce in advance the amount they intend to lift at each stage, thus allowing quantification of the riskiness of their choices. We present two key findings. First, risk taking exhibits an inverted-U relationship with rank: risk taking increases up to rank six, but athletes then revert to safer strategies towards the bottom of the ranking. Second, athletes systematically underperform when ranked closer to the top, despite higher incentives to perform well. An athlete is more than 30 percent less likely to lift the announced weight when ranked first than tenth. Athletes also underperform in relatively more prestigious competitions, when the competition is more intense, and when the potential gain from a successful lift is higher. Taken together, these findings suggest that athletes may systematically “choke under pressure”.

“Leveraging Monopoly Power by Limiting Inter-operability: Theory and Evidence from Computer Markets” (co-authored with Kai-Uwe Kühn, University of Michigan, and John Van Reenen, London School of Economics) new version coming soon

When will a monopolist have incentives to leverage into a complementary market by degrading compatibility/interoperability? We develop a framework where arbitrage limits price discrimination, so leveraging becomes a method to extract more rents from the monopoly market by “restoring” second degree price discrimination. In a random coefficient model with complements we derive explicit conditions for when these incentives will hold. We implement our framework in the context of Microsoft’s alleged strategic incentives to leverage market power from personal computer to server operating systems. We estimate a structural random coefficients demand system linking the two complementary markets of PCs and network servers using quarterly US data from 1996 to 2001. We provide empirical evidence, in line with our theoretical predictions, that Microsoft did have incentives to reduce interoperability in the late 1990s.

"Differential Merger Effects: The Case of the Personal Computer Industry” (London Business School, mimeo, November 2004; also STICERD Working Paper No. EI/39) - Revised version coming soon

This paper examines how information on the purchasing patterns of different customer segments can be used to more accurately evaluate the economic impact of mergers. Using a detailed dataset for the leading manufacturers in the US during the late nineties, I evaluate the welfare effects of the biggest ($25 billion) merger in the history of the PC industry between Hewlett-Packard and Compaq. I follow a two-step empirical strategy. In the first step, I estimate a demand system employing a random coefficients discrete choice model. In the second step, I simulate the postmerger oligopolistic equilibrium and compute the welfare effects. I extend previous research by analysing the merger effects not only for the whole market but also for three customer segments (home, small business and large business). Results from the demand estimation and merger analysis reveal that: (i) the random coefficients model provides a more realistic market picture than simpler models, (ii) despite being the world's second and third largest PC manufacturers, the merged HP-Compaq entity would not raise postmerger prices significantly, (iii) there is considerable heterogeneity in preferences across segments that persists over time, and (iv) the merger effects differ considerably across segments.

RESEARCH IN PROGRESS

"Does Management Matter? New Empirics and Old Theories” (co-authored with Nick Bloom, Stanford University, Raffaella Sadun and John Van Reenen, London School of Economics) coming soon

We construct a new survey in an attempt to codify the concept of good and bad management into a measure applicable to different firms within the manufacturing sector. We focus into four key areas: operations management, performance & target management and talent management. Using this survey and a team of 46 MBAs and postgraduates at the Centre for Economic Performance (LSE) we conducted phone interviews with one or two senior plant-level managers from a randomly selected sample of manufacturing firms. This allowed us to measure management practices in a systematic way in more than 4,000 manufacturing firms across Europe (UK, Italy, Germany, France, Portugal, Sweden, Poland and Greece), the US and Asia (China, India, Japan and Korea). Next, following the methodology of Bloom and Van Reenen (2007), we match this data with information from firm accounts in order to explore in detail the relationship between management practices, the economic environment and the company’s performance.

“Product Life Cycles in the Personal Computer Industry” revised version coming soon

This paper examines whether product life cycles are getting shorter over time. There is a common belief, as expressed in the business press, that this phenomenon is pervasive across industries with important implications for firms' pricing decisions, investment behavior and manufacturing processes. Prior studies (Greenstein and Wade, 1998; Bauys, 1998) failed to detect any such pattern. Using a unique dataset that essentially covers the whole personal computer industry evolution (1974-2000) in the US and worldwide, I document that: (i) product lifetimes are getting shorter at all levels of aggregation, (ii) this pattern is more evident in the more dynamic US market. Next, using a duration analysis framework I provide statistical evidence on the effects of various firms' strategies and market structure characteristics on product turnover. It is shown that a strong brand name and earlier adoption of new technology gives a brand model significantly more chances to survive in the market. On the contrary, co-existing in the market with another firm's model of the same technology generation lessens both models' survival probabilities. Finally, the effect of the density of competition from various rivals' technology generation models was found to be positive and significant, although not very robust.

“Choking under Pressure in Diving Competitions” with Mario Pagliero, University of Turin and Collegio Carlo Alberto.

"Mergers in the UK Automobile Industry” (co-authored with Adam Rosen, University College London, and James Walker, University of Reading)