Management practices and competitiveness: A multisector study in the Brazilian industry.
| Autor | Fleury, Maria Tereza Leme |
| Cargo | Report |
Introduction
The Practice-Based View (PBV) has become an insightful approach among alternative theories of firm competitiveness. Proponents of PBV assume that ordinary and public-domain practices may be sources of superior performance (Betts, Super, & North, 2018; Bromiley & Rau, 2014) and argue that performance heterogeneity can be explained from the choice and development of management practices (Bromiley & Rau, 2014, 2016). This perspective has gained prominence as it echoes the idea of best practices, which is increasingly popular not only among practitioners, but also among scholars (Silveira & Sousa, 2010; Voss, 2005). Moreover, PBV has enjoyed extensive empirical support from the research program Measuring and explaining management practices across firms and countries that Bloom and Van Reenen have been conducting since 2004, surveying data from more than ten thousand companies in 34 countries (Bloom, Sadun, & Van Reenen, 2016; Bloom & Van Reenen, 2006, 2007).
At the firm level, the decision making process for management practices selection and development may be influenced by external factors. Firms may adopt best practices because they operate in advanced industrial settings, whose fast-changing environment leads firms to imitate already proven management practices (Lei & Slocum, 2005; Zhang & Dhaliwal, 2009) or as a reaction triggered by tough competition (Dubey et al., 2017; Turkulainen, Kauppi, & Nermes, 2017). Government financing and support received in the context of industrial policies (Finchelstein, 2017; Wu, Ding, & Chen, 2012) may also influence the selection and adoption of management practices. However, industry level effects on the adoption and development of management practices are not problematized in PBV as possible explanations for performance heterogeneity (Carter, Kosmol, & Kaufmann, 2017).
In this study, we adopt a sectoral perspective to investigate the influence that the level of competition, the degree of technological advancement, and the intensity of governmental support in the form of subsidized loans may have on the adoption of management practices by firms. In other words, we ask: Do firms in sectors that are more open to competition, more technologically advanced and more assisted by the government display more advanced management practices and superior performance?
We address the research question through the analysis of data surveyed among firms distributed in seven important Brazilian industrial sectors, which represent every category of economic activity. An agro-industry (sugarcane) and an extractive one (mining) represent the primary sector while the secondary sector is represented by a make-to-order industry (graphics), a mass production one (food and beverage) and one continuous process production sector (chemicals). Finally the tertiary, the services sector, is represented by a high value-adding technology-intensive sector (telecommunications) and a low value-adding low technology sector (gas installation services). The sample encompasses 70 firms equally distributed among the seven sectors, which allows us to reduce biases caused by under/overrepresentation of any particular sector. Data collection at the firm level followed the method proposed by Bloom and Van Reenen for the scoring of management practices. Data gathered was analyzed through Ordinary Least Squares regressions designed to assess our hypotheses.
We contribute to PBV by shedding light on the implications of the sectoral perspective for the analysis of best practices adoption and performance impacts. In addition, the study of how external factors related to the business environment influence the development of management practices also brings insights at the theoretical level.
On the practical side, investigating the research question in a country like Brazil leads to practical insights. Brazil has been losing competitiveness year after year, currently occupying the 61st position among the 63 countries (IMD, n.d.). Studies show that at the firm level, external and internal threats jeopardize potential competitiveness (De Negri & Cavalcante, 2014). Inadequate management practices are the most important internal factor, followed by absenteeism and lack of investment in the modernization or expansion of productive capacity. External factors include tax burden, labor regulation, interest rate and lack of infrastructure. Therefore, this study contributes by disclosing some of the cause-effect relationships that make it difficult for the country to recover better competitive positions.
Theoretical Background and Hypotheses
By suggesting that management practices accessible to any company, passive of imitation and easily transferred between firms will influence firms' performance, PBV diverges from more conventional lenses such as those based on the Resource-based view (RBV) or Dynamic Capabilities. In fact, for RBV, only unique and inimitable resources become sources of competitive advantage (Barney, 1991; Barney & Clark, 2007). Under the lenses of capabilities, firm performance is related to the possession of dynamic capabilities, which firms can use to intentionally create, extend, or modify processes and services, their production or yet their consuming markets (Helfat et al., 2007; Winter, 2003). Dynamic capabilities are especially required when firms operate in rapidly changing or moderately dynamic business environments (Eisenhardt & Martin, 2000; Teece, 2014; Teece, Pisano, & Shuen, 1997).
Alternatively, PBV has a strong connection with Nelson and Winter's (1982) evolutionary theory of economic change, considering routines as regular and predictable behavior patterns of firms (Bromiley & Rau, 2014). It acknowledges somewhat more pragmatically that tradeable resources can also be valuable for firms, and that the way firms use such resources is important from the performance viewpoint. To some extent, PBV can still be related to the Capabilities Theory, as capabilities derive from an interaction between routines, learning mechanisms, and choices (Bromiley & Rau, 2014; Zollo & Winter, 2002). In this sense, PBV may be seen as a natural theoretical frame for studies investigating the performance effects of ordinary and public-domain practices (Betts et al., 2018; Bromiley & Rau, 2014).
Industries' characteristics and management practices
A PBV key concept is the level of management practice adoption, which deals with the heterogeneity in the application of a given practice in different firms (Bromiley & Rau, 2016). While the exact mean of "good" and "bad" management practices can be extremely idiosyncratic for each firm (Bloom & Van Reenen, 2006, p. 18), Bloom and Van Reenen are studying the adoption of common management practices, with the help of industry experts and consultancies to establish scales to measure the relative importance of each practice for each industrial sector (Bloom & Van Reenen, 2006, 2007). The outcomes of their research show a considerable dispersion in the adoption and development of management practices at the industry and country levels. In every country there is a group of companies with advanced practices, another with intermediate-level practices and a third group with poor practices. The differences among countries are associated with the distribution of firms in each group. For example, the United States stands out for having few poorly managed companies, while countries such as Brazil, China, and India, although also exhibiting companies with advanced practices, have larger groups of poorly managed companies (Bloom, Genakos, Sadun, & Van Reenen, 2012; Bloom, Mahajan, McKenzie, & Roberts, 2010).
Among the factors that contribute to the prevalence of poorly managed companies in less developed countries, Bloom, Mahajan, McKenzie and Roberts (2010) shed light on the low levels of competition faced by domestic firms. Protected domestic markets and lack of stimulus for competition allow the survival of incompetent companies. Competition can lead to the improvement overall levels of industry management practices either by expelling poorly managed companies from the market through natural selection processes or by stimulating companies' improvement efforts (Bloom & Van Reenen, 2007; Dubey et al., 2017). Bloom and Van Reenen verified this effect with different competition measures, such as imports indexes and companies' market power (Bloom & Van Reenen, 2010).
The studies conducted with Brazilian companies support the heterogeneity of management practices, but limitations in their sample sizes (Padrao, Motta, & Vieira, 2009) and in their focus on single industries (Brito & Sauan, 2016; Mauro & Brito, 2011) jeopardize more detailed assessment of this phenomenon. Therefore, we include the following hypothesis for the relationship between sectoral competition and the level of companies' management practices:
H1. The intensity of competition in an industrial sector is positively related to the level of the management practices adopted by companies in that sector.
The PBV literature pays little attention to the consequences of macro-level influences on the adoption of best practices by firms, even though Bromiley and Rau (2016, p. 103) acknowledge that "organizational history and context will matter not only by influencing the practices the firm considers using but also by influencing how the new practices influence firm performance". Accordingly, Bloom, Sadun and Van Reenen (2016) indicate that different industrial sectors tend to specialize in specific management practices. For example, capital-intensive industries tend to exhibit higher levels of practices associated with monitoring and targets, while labor-intensive industries tend to focus on practices related to human resource management. These authors suggest that this finding opens the possibility for different practices to have distinct uses in various contexts.
In this study, we discuss the influence of...
Para continuar a ler
PEÇA SUA AVALIAÇÃOCOPYRIGHT GALE, Cengage Learning. All rights reserved.
