Banque Nationale De Belgique Sa · EURONEXT:BNB

Banque Nationale De Belgique Sa — Technical Presentation (September 2015)

38 slides from Banque Nationale De Belgique Sa's technical presentation, Sep 1, 2015

1. Slide 1: Managing Trade: Evidence from China and the US

   Managing Trade: Evidence from China and the US Nick Bloom, Stanford & NBER Kalina Manova, Stanford, Oxford, NBER & CEPR John Van Reenen, London School of Economics & CEP Zhihong Yu, Nottingham National Bank of Belgium, September 1, 2015 Kalina Manova, Stanford & Oxford NBB, September 2015 1

2. Slide 2: Motivation

   Motivation  Tremendous variation in export activity across firms ■ More productive firms more likely to export, enter more markets with more products, and export more (Melitz 2003, Bernard et al 2007) ■ More successful exporters use high-quality inputs to produce high- quality goods (Verhoogen 2008

3. Slide 3: This Paper

   This Paper  Provide first evidence on link between managerial competence and export performance to inform underlying mechanisms ■ Exploit unique data on management practices, balance sheets, and comprehensive export and import activity at the firm level ■ Study two major export economies with diffe

4. Slide 4: Why Do We Care?

   Why Do We Care?  Firm heterogeneity matters for aggregate productivity, welfare and gains from trade (Hsieh-Klenow 2009, Arkolakis et al 2012, Melitz-Redding 2013) ■ Reallocation across firms and productivity upgrading within firms important in adjustment to trade reforms (Pavcnik 2002, Bernard et

5. Slide 5: Outline

   Outline 1. Motivation 2. Data and estimation 3. Empirical evidence 4. Conclusions Kalina Manova, Stanford & Oxford NBB, September 2015 5

6. Slide 6: World Management Surveys

   World Management Surveys  Managerial practices of 20,000+ firms, ~40 countries since 2002 ■ Stratified representative samples ■ 45min phone interviews of manufacturing plant managers ■ Participation encouraged by high endorsements  Double-blind interviews ■ Interviewers do not know companies’ perf

7. Slide 7: Example Monitoring: how is performance tracked?

   Example Monitoring: how is performance tracked? Score (1): Measures (3): Most key (5): Performance is tracked do not performance continuously indicate directly indicators tracked and if overall are tracked communicated, business formally. both formally and objectives are Tracking is informally, to a

8. Slide 8: Example of Performance Metrics: Car Plant

   Example of Performance Metrics: Car Plant Kalina Manova, Stanford & Oxford NBB, September 2015 8

9. Slide 9: Example of No Performance Metrics: Textile Plant

   Example of No Performance Metrics: Textile Plant Kalina Manova, Stanford & Oxford NBB, September 2015 9

10. Slide 10: Example Incentives: how does promotion work?

    Example Incentives: how does promotion work? Score (1) People are (3) People (5) We actively promoted are promoted identify, develop primarily upon primarily and promote our the basis of upon the top performers tenure, basis of irrespective of performance performance (ability & effort) Kalina Manova

11. Slide 11: Example Monitoring: number of KPIs

    Example Monitoring: number of KPIs Kalina Manova, Stanford & Oxford NBB, September 2015 11

12. Slide 12: Example Targets: use of production targets

    Example Targets: use of production targets Kalina Manova, Stanford & Oxford NBB, September 2015 12

13. Slide 13: Example Incentives: performance bonuses

    Example Incentives: performance bonuses Kalina Manova, Stanford & Oxford NBB, September 2015 13

14. Slide 14: Management Data

    Management Data Kalina Manova, Stanford & Oxford NBB, September 2015 14

15. Slide 15: Management Data

    Management Data  China Management Survey (Bloom, Sadun & Van Reenen 2013) ■ 507 firms, 2007 ■ 18 questions  management z-score: mean -0.298, st dev 0.418 Kalina Manova, Stanford & Oxford NBB, September 2015 15

16. Slide 16: Matched to Balance-Sheet Data

    … Matched to Balance-Sheet Data  China’s Annual Survey of Industrial Enterprises (NBS) ■ >200,000 firms, 1999-2007 ■ Output, total exports, employment, inputs, ownership, …  Match 485 firms in management survey to ASIE ■ 60% of matched firms export ■ Unconditional export management premium: 23% Ex

17. Slide 17: Matched to Trade Data

    … Matched to Trade Data  Chinese Customs Trade Statistics (GACC) ■ >120,000 firms, ~8,000 products, >200 countries, 2000-2008 ■ All export and import transactions: value, quantity, trade regime, …  Match 334 firms in management survey to CCTS ■ 18% only export, 10% only import, 72% do both N Mean

18. Slide 18: Empirical Strategy

    Empirical Strategy  Document the conditional correlation between firms’ managerial competence and trade performance Trade ft = α + β ⋅ Management f + δ ′ ⋅ Z ft + ϕ p + ϕi + ϕt + ε ft ■ Tradeft : various export and import outcomes ■ Managementf : management z-score ■ φp, φi, φt : 31 province FE, 82

19. Slide 19: Management and Export Success

    Management and Export Success  Improving management by 1 standard deviation associated with 5% higher probability of exporting and 27% higher exports Dep Variable: Exporter Dummy Log Exports Management Score 0.096** 0.116*** 0.638** 0.566* (2.30) (2.75) (2.14) (1.81) Foreign 0.188*** 0.202*** 0.588

20. Slide 20: Extensive Margin of Exports

    Extensive Margin of Exports  Improving management by 1 standard deviation associated with 19% more destinations,17% more export products, and 22% more destination-product pairs Dep Variable: Log # Destinations Log # Products Log # Dest-Prod Pairs Baseline Controls Baseline Controls Baseline Control

21. Slide 21: Intensive Margin of Exports

    Intensive Margin of Exports  Better managed firms sell more in top destination-product markets but not more in average market because of entry into more markets Dep Variable: Log Exports Top Prod Log Exports Top Dest Log Exports Top Dest-Prod Log Avg Exports per Dest-Prod Baseline Controls Baseline

22. Slide 22: Interpreting the Results

    Interpreting the Results  Standard trade theory: more productive firms choose to use more and better inputs and thereby attain superior export performance ■ Some evidence that multiple firm attributes matter ■ No consensus on productivity-export link in China  Management: TFP vs. input vs. second

23. Slide 23: Management vs. Productivity

    Management vs. Productivity Exporter Log # Dest- Log Avg Exports Dep Variable: TFP (Lev-Pet) Log Exports Log # Dest Log # Prod Dummy Prod per Dest-Prod Management Score 0.211* 0.138*** 0.593* 0.484*** 0.456*** 0.586*** 0.007 (1.69) (2.96) (1.87) (2.92) (3.69) (3.19) (0.03) TFP (Lev-Pet) -0.010 0.257

24. Slide 24: In Pursuit of Mechanisms

    In Pursuit of Mechanisms Why is managerial competence associated with export success?  Does good management increase overall firm activity? ■ Results robust to controlling for domestic sales, so that trade is disproportionately more sensitive to managerial quality Kalina Manova, Stanford & Oxford N

25. Slide 25: Trade vs. Domestic Production

    Trade vs. Domestic Production Exporter Log # Dest- Log Avg Exports Dep Variable: Log Output Log Exports Log # Dest Log # Prod Dummy Prod per Dest-Prod Management Score 0.747*** 0.140*** 0.611* 0.446*** 0.409*** 0.533*** 0.078 (5.30) (3.32) (1.96) (2.78) (3.36) (2.96) (0.37) Log Domestic Sales -0.025

26. Slide 26: In Pursuit of Mechanisms

    In Pursuit of Mechanisms Why is managerial competence associated with export success?  Does good management increase overall firm activity? Not only.  Do some management practices matter more than others? ■ Operations and monitoring most important for export success, targets and people management

27. Slide 27: Management Components

    Management Components Dep Variable: Exporter Dummy Log Exports Log Output Log Value TFP Baseline Controls Baseline Controls Baseline Controls Added (Lev-Pet) Oper & Monitor 0.079*** 0.080*** 0.416** 0.365* 0.422*** 0.359*** 0.320*** 0.136** (3.28) (3.19) (2.54) (1.92) (5.73) (5.46) (4.86) (2.38) Tar

28. Slide 28: In Pursuit of Mechanisms

    In Pursuit of Mechanisms Why is managerial competence associated with export success?  Does good management increase overall firm activity? Not only.  Do some management practices matter more than others? A bit.  Does good management increase production efficiency and/or product quality? Kalina M

29. Slide 29: Management and Product Quality

    Management and Product Quality  Producing high-quality goods may require effective management ■ Establishing relationships with foreign buyers ■ Identifying and sourcing high-quality inputs ■ Ensuring quality control during manufacturing ■ Assembling complex products via multiple inputs/stages ■ Me

30. Slide 30: Management and Product Quality

    Management and Product Quality  Producing high-quality goods may require effective management Kalina Manova, Stanford & Oxford NBB, September 2015 30

31. Slide 31: Management and Product Quality

    Management and Product Quality  Producing high-quality goods may require effective management Kalina Manova, Stanford & Oxford NBB, September 2015 31

32. Slide 32: Management and Export Quality

    Management and Export Quality  Well managed firms export expensive varieties, esp in sectors intensive in advertising/R&D and relationship-specific investment ■ Similar results for product quality inferred from price and quantity Dep Variable: Log Export Log Export Log Export Unit Value Value Quant

33. Slide 33: Management and Input Quality

    Management and Input Quality  Better managed exporters use more imported inputs, more expensive inputs, from richer countries of origin ■ In China, foreign inputs from advanced countries are higher quality Dep Variable: Log (Imports/Inputs) Log Imports Log Avg Origin Income Log Import Unit Value Ba

34. Slide 34: Management and Input Complexity

    Management and Input Complexity  Better managed exporters use more imported inputs, from more countries of origin ■ Manufacturing more complex products requires bigger input range ■ Robust to controlling for number of export products Dep Variable: Log # Origins Log # Import Prod Log # Origin-Prod B

35. Slide 35: Management and Profits

    Management and Profits  Better managed exporters have higher profits, even controlling for domestic sales ■ Consistent with exporting fewer units of higher-quality products with higher profit margins (for same export revenues in dest-product mkt) Dep Variable: Log Profits Baseline Controls Domestic

36. Slide 36: Current Work: US

    Current Work: US  Unique data for the US provides an opportunity to assess the relationship between trade and management with more comprehensive data for an advanced economy ■ Management Organizational Practices Survey: 47,000+ plants and 10,000+ firms in 2010 ■ Census of Manufacturers + Annual Sur

37. Slide 37: Next Steps: Theory

    Next Steps: Theory  A heterogeneous-firm trade model with endogenous quality choice can rationalize these results and inform policy implications  Complementarity between good management and product quality ■ Output quality depends on input quality and assembly technology ■ Output complexity depend

38. Slide 38: Conclusions

    Conclusions  Firms’ management practices appear important for firms’ ability to produce sophisticated products and to export to foreign markets ■ Sheds new light on sources of firm heterogeneity ■ Informs mechanisms through which good management operates ■ Suggests management know-how and access to

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