Nicholas Bloom: belief

Transcript context

…How much of the measured productivity edge of American multinationals is just tax arbitrage and where profits get assigned to? I never really thought a huge amount of it was that. My personal view — I guess this is, again, biased by my research — is American firms are particularly just fantastically well managed. I’ve done a lot of work for many years, looking at management practices, trying to collect data in cross-country surveys. To explain what I mean, management practices — the basics are, do you collect information and use it to improve yourself? Think of lean, collecting information all the time, and having improvement processes. Secondly, do you train and promote employees, try to promote the best people, trying to avoid things like promoting family, friends, or long-serving employees? So meritocratic HR systems. I’m not going to say American firms are perfect. They’re definitely not perfect. There are many management scandals. But on average, American firms are much better managed, and they take that with them abroad. There’s this whole literature that has been sometimes called dark matter, or explaining why we seem to have this endless negative balance of trade but positive balance on our investments abroad. American companies seem to make huge profits abroad. One big explanation is they’re just exploiting lots of this intangible capital, which we think of as good management. American multinationals around the world are well managed, and they make a lot of profits where they’re located in the UK and France, in Ghana, in Thailand — wherever they are. That’s helping keep the US economy afloat, that return profits. I don’t see that as being related — transfer pricing and offshore tax manipulation. That is a factor, but I think American firms are primarily driven, actually, by better innovation and better management. Why hasn’t information technology boosted productivity more? Productivity is sluggish. IT has been taking off like crazy. Companies, big business is what uses IT. How do we fit the whole picture together?…

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