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- Title
Management practices and productivity: Does employee representation play a moderating role?
- Authors
Jirjahn, Uwe; Laible, Marie‐Christine; Mohrenweiser, Jens
- Abstract
Bloom and Van Reenen (2007) have suggested an index of best management practices capturing three broad areas: monitoring, targets and incentives. However, it is an open question whether the functioning of these practices depends on contextual factors. From a theoretical viewpoint, the management practices involve both productive and dysfunctional effects. We hypothesize that the relative strength of these effects depends on the industrial relations climate. Works councils help management practices live up to their potential by building long‐term employer‐employee cooperation. Our empirical analysis uses panel data from the German Management and Organizational Practices survey to examine this hypothesis. Applying a reformulated version of the Mundlak estimator, we disentangle short‐term and sustaining productivity effects of the management practices. Our results show that the incidence of a works council specifically strengthens the sustaining productivity effect of the practices. Practitioner notes: What is currently known?Bloom and Van Reenen (2007) have suggested an index of best management practices capturing three broad areas: monitoring, targets and incentives.The practices captured by the index can be seen as typical US management practices.Studies for the US and other countries have shown that firms scoring high on the index have substantially higher productivity.Nonetheless it is an open question whether the functioning of the practices depends on contextual factors. What this paper adds?We theorize that nonunion worker representation improves the functioning of the management practices by building trustful and cooperative employment relations.Using panel data from Germany, we apply a new estimation method to disentangle short‐term and sustaining productivity effects of the practices.The sustaining effect of the management practices is much stronger in firms where employees are represented by a works council. Implications for practitionersThe functioning of the practices can be better understood under a pluralist than under a unitarist management perspective.Typical US management practices and a typical European institution of nonunion employee representation complement each other.The adoption of US‐style management practices by firms in Europe does not undermine works councils, but instead increases their position.Overcoming the representation gap in the US by implementing works councils may increase productivity by improving the functioning of management practices used by American firms.
- Publication
Human Resource Management Journal, 2024, Vol 34, Issue 1, p236
- ISSN
0954-5395
- Publication type
Article
- DOI
10.1111/1748-8583.12526