| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

Home 
 
 News
 Irish
 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 International
 Property
 Innovation
 
 Analysis/Comment
 
 Asia Economy

RSS FEED


How to use our RSS feed

 
Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

We provide access to live business television and business related videos from: Bloomberg TV; The Wall Street Journal; CNBC and the Financial Times. Click image:

Links

Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax 2008

Climate Change Reports

Global News

Bloomberg News

CNN Money

Cnet Tech News

Newspapers

Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News

 

Feedback

 

Content Management by interactivetools.com.

News : International Last Updated: Apr 24, 2009 - 5:31:05 PM


"It ain't what you do, it's the way that you do I.T." - Why US multinationals win the productivity race
By Finfacts Team
Oct 6, 2005 - 6:17:00 PM

Email this article
 Printer friendly page

John Van Reenen , Professor in the Department of Economics, London School of Economics Director Centre for Economic Performance. Expertise: Innovation, productivity, Industrial organisation, labour economics, public policy, competition policy
Research published in the UK on Thursday, show that the US productivity miracle of the past 10 years is not explained by the US business environment being better; rather, US companies are simply better at using computers and other technology to drive productivity higher. The effect explains most of the gap in productivity growth between the US and the UK and other European countries over the past decade.

US output per hour grew by 2.5 per cent a year on average between 1995 and 2004 compared with 1.5 per cent in the 15 members of the EU before enlargement.

Professor John Van Reenen together with Nick Bloom and Raffaella Sadun of the Centre for Economic Performance (CEP) at the London School of Economics, have published a joint investigation with the UK Office for National Statistics (ONS), sponsored by the Department of Trade and Industry (DTI). The research paper titled It ain't what you do, it's the way that you do I.T.: testing explanations of productivity growth using US affiliates indicates that investment in new information and communications technologies (ICT) improves the productivity of UK businesses.

Work by research institutions such as the US National Institute of Economic and Social Research and the US Conference Board confirmed that the lead in US productivity was accounted for almost exclusively in sectors of the economy that used technology intensively. Retail, wholesale and finance sectors were most important.

US multinationals such as Starbucks operating in Europe, have higher productivity than European firms because of the intensive use of technology combined with evidence for significant differences in the “organizational capital” of US firms relative to European firms
The researchers investigated whether the growing productrivity gap was explained by the US enjoying specific advantages, such as better regulations, less intrusive planning laws or more physical space, or was there something special about the way US companies operated?

John Van Reenen, CEP director, says that the explanation is a combination of better US management, use of information technology and corporate practices.

The CEP researchers say that one of the most startling economic facts of the last decade has been the reversal in the longstanding catch-up of European countries� productivity with the US. Labour productivity growth in the US accelerated after 1995 following a long-term slowdown after the 1970s Oil shocks. Decompositions of this productivity growth show that the great majority has occurred in those sectors that either intensively use or produce IT. EU countries had similar productivity acceleration in IT producing sectors but failed to achieve the spectacular levels of productivity growth in the sectors that used IT intensively. These sectors include retail, wholesale and financial intermediation. Britain has done better than France or Germany in this respect, but not as well as the US. Given the common availability of IT throughout the world at broadly similar prices, it is a major puzzle to explain why these IT related productivity effects have not been more widespread.

The CEP researchers used detailed data held by the Office for National Statistics about the performance of more than 7,000 private sector establishments in Britain. The researchers were able to demonstrate that US-owned establishments in the UK managed to increase productivity pretty much like their parent companies at home.

The researchers say that productivity growth in sectors that intensively use information and communication technologies (ICT) appears to have accelerated faster in the US than in Europe since 1995.

If this was partly due to the superior management/organization of US firms (rather than simply the US geographical or regulatory environment) we would expect to see a stronger association of productivity with IT for US multinationals located Europe than for other firms. We examine a large panel of UK establishments from all business sectors and provide evidence that US owned establishments have a significantly higher productivity of IT capital than either non-US multinationals or domestically owned establishments. Indeed, the differential impact of IT appears to fully account for almost all the difference in total factor productivity between US-owned and all other establishments. Further, this finding is particularly strong in the sectors that intensively use information technologies: the very same ones that account for the US-European productivity growth differential since the mid 1990s.

The paper shows that the big productivity differences were in industries that used IT intensively. US-owned multinationals in the UK, such as Asda or Starbucks, got more productivity from their workforce than other multinationals, such as Tesco, and much more than purely domestic companies. Output per employee in US-owned establishments was 40 per cent higher than domestic ones, and the amount of IT capital used was 17 per cent higher than multinationals with non-US owners.

New data enabled researchers to estimate what proportion of the productivity difference was because of US establishments having more IT, and what proportion was down to them using it better.

Professor Van Reenen has said that almost 80 per cent of the difference came from the use of computers. "The higher return to IT is seen only in US multinationals; non-US multinationals look like domestic UK firms in terms of getting the most out of IT."

Van Reenen says that US companies in the sample, were managed differently from non-US companies in two important respects. They had more "aggressive" human resources practices, promoting good performers quickly and getting rid of weaker performers and they de-volved greater managerial autonomy in the implementation of IT systems to local plants rather than trying to run everything centrally.

Authors: Nick Bloom,  Raffaella Sadun,  John Van Reenen

Download (PDF, 348Kb)

http://www.statistics.gov.uk/cci/article.asp?ID=1236


© Copyright 2009 by Finfacts.com

Top of Page

International
Latest Headlines
Wednesday newspaper review: December 17, 2014
Tuesday newspaper review: December 16, 2014
Monday Newspaper Review - Irish Business News and International Stories - - December 08, 2014
Friday Newspaper Review - Irish Business News and International Stories - - November 28, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - November 27, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - November 25, 2014
Friday Newspaper Review - Irish Business News and International Stories - - November 21, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - November 20, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - November 19, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - November 18, 2014
Monday Newspaper Review - Irish Business News and International Stories - - November 17, 2014
Friday Newspaper Review - Irish Business News and International Stories - - November 14, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - November 13, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - November 12, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - November 11, 2014
Monday Newspaper Review - Irish Business News and International Stories - - November 10, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - November 06, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - November 04, 2014
Monday Newspaper Review - Irish Business News and International Stories - - November 03, 2014
Friday Newspaper Review - Irish Business News and International Stories - - October 31, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - October 30, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - October 29, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - October 28, 2014
Friday Newspaper Review - Irish Business News and International Stories - - October 24, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - October 22, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - October 21, 2014
Monday Newspaper Review - Irish Business News and International Stories - - October 20, 2014
Friday Newspaper Review - Irish Business News and International Stories - - October 17, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - October 16, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - October 15, 2014
Monday Newspaper Review - Irish Business News and International Stories - - October 13, 2014
Friday Newspaper Review - Irish Business News and International Stories - - October 10, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - October 09, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - October 08, 2014
Tuesday Newspaper Review - Irish Business News and International Stories - - October 07, 2014
Monday Newspaper Review - Irish Business News and International Stories - - October 06, 2014
Thursday Newspaper Review - Irish Business News and International Stories - - October 02, 2014
Wednesday Newspaper Review - Irish Business News and International Stories - - October 01, 2014
Monday Newspaper Review - Irish Business News and International Stories - - September 29, 2014
Friday Newspaper Review - Irish Business News and International Stories - - September 26, 2014