Bryan Caplan  

Multinationals Are Well-Managed in All Countries

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One picture is worth a thousand words, courtesy of Bloom and Van Reenen's "Why Do Management Practices Differ Across Firms and Countries?" (Journal of Economic Perspectives, 2010)

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My earlier comments on this still-underrated piece here.




COMMENTS (8 to date)
E. Harding writes:

What's going on with China in that graph?

ChrisA writes:

My experience in working in multiple developing countries is that this is true - multi-nationals are usually have much more "capable" managers than local firms. But is this the cause or just the effect of their being more successful? For one thing - you don't become a multi-national company unless you are successful. Which means that you have money to hire elite managers and you can also invest in training them better. But this came after the success, so it's not clear that hiring elite managers actually causes the success. A good example is Apple - I can easily believe that their international managers are all very good - but I would argue their success comes almost invariably from the insights of Steve Jobs into consumer electronics, and is nothing to do with their international managers.

Lauren writes:

Hi, E. Harding.

You asked

What's going on with China in that graph
What's going on clearly, in that graph on management, is that China is right next to and just below India--so, China is quite in line with other fast-developing countries in recent years regarding multinationals and management. China and India are also, somewhat surprisingly, both above Portugal, Brazil, and Greece--countries that have had dramatic setbacks since the 2008 financial crisis.

Why do you focus on China? Are you a fan of China? A detractor of China? Why single out China in the long list of countries in the graph? Are you asking why there is a lower percentage of multinationals in charge in China than in other countries? Please explain why you have singled out China.

David S writes:

Re China, I think the point he was making was that China was an outlier with unusually poor international corporate management.

Perhaps attributable to party officials getting corporate governance roles based on connections rather than merit? I'd think that would be true of some of the other countries as well, though.

Lauren writes:

Thanks, David S. That's probably exactly what E. Harding was focusing on. I didn't cotton to what the issue might be.

My apologies to E. Harding if I came down too hard.

Steve Sedio writes:

Multinational companies compete on a global scale. They have to be at least as good as the competition in each location (or they wouldn't be there). Those combined skills, applied globally, can make you far more competitive.

If you look at the countries where the local companies do well, the competition is strong, requiring better management skills.

Elias Hakansson writes:

Yes, the market invariably selects for successful management wherever you are, but there's no surprise why Northern Ireland scores higher than other businesses. It's probably because of their tax policies for international corporations.

jon writes:

The graphs a bit misleading. It's based on a 1-5 scale, but it only shows 2.4 to 3.4.

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