Talents from Abroad. Foreign Managers and Productivity in the United Kingdom.

Abstract

In this paper, we test the contribution of foreign management on firms' competitiveness. We use a novel dataset on the careers of 165,084 managers employed by 13,106 companies in the United Kingdom in the period 2009-2017. We find that a domestic manufacturing firm becomes on average between 9% and 12% more productive after hiring at least one foreign manager. Interestingly, productivity gains by domestic firms after recruiting foreign managers are similar in magnitude to gains after foreign acquisitions as from previous literature. Eventually, we do not find significant gains by foreign-owned firms hiring foreign managers. Our identification strategy combines difference-indifference and matching techniques to challenge reverse causality. We proxy firms' competitiveness either by total factor productivity or by technical efficiency derived from stochastic frontier analyses. Eventually, we argue that limits to the circulation of talents, as for example in case of a Brexit event, may hamper the allocation of labor productive resources.

Global Firms

“…This property of the model is consistent with the literature on pricing to market, where firms charge different prices for the same good across markets, including Krugman (1987), Bergin and Feenstra (2001), Atkeson and Burstein (2008), Goldberg and Hellerstein (2013), and Fitzgerald and Haller (2014), as reviewed in De Loecker and Goldberg (2014). Finally, the variable markup in equations (21) and (22) implies that an increase in marginal costs is not fully passed on to consumers in the form of a higher price, because the fall in market share induced by a higher price leads to a fall in markup. A large body of empirical research confirms such incomplete pass-through, as reviewed in Goldberg and Knetter (1997), with implications for monetary policy and the international transmission of shocks, as examined in Smets and Wouters (2007); Gopinath and Itskhoki (2010) ;Berman, Martin, and Mayer (2012); and Amiti, Itskhoki, and Konings (2014).…”

“…We also report some additional results in which we use the information on exports and imports by firm, product, destination, and year in the trade transactions data. 22…”

“…Table 1 examines these predictions for US manufacturing industries using data from the 2007 LFTTD. In column 1, we provide a sense of the relative size of each industry, by reporting the share of each three-digit North American Industrial Classification 22 Relatively little research has examined the properties of the trade transactions data at finer levels of disaggregation than firm, product, destination, and year, with some exceptions such as Koren (2015a, 2015b).…”

What Drives Differences in Management Practices?

“…24 To avoid over estimating the dispersion in management coefficients, we apply an Empirical Bayes Shrinkage procedure. 25 The distribution is centered on 0.2, which reassuringly is the coefficient from the pooled regression. All establishments operate in industries with a positive labor productivity-management relation.…”

“…To comply with Census disclosure avoidance requirements, we do not report the actual coefficients industry by industry, but a smoothed histogram 25. We follow closely Chandra et al (2016).…”