PhD Seminar: Which aspect of management practices matter for innovation propensity? Evidence from Australian firms

Which aspect of management practices matter for innovation propensity? Evidence from Australian firms

Abstract: This paper examines the propensity of firms to attempt innovation by comparing different aspects of management practices related to the pioneering works of Bloom and Van Reenen (2007) and Brynjolfsson and McElheran (2016) . We construct different management scores at the firm level that measure the adoption of structured management practices (SM) on one hand, and the use of data in decision making (DDD) on the other. Using detailed administrative data on Australian firms across the wider economy, we find that those with better scores in either aspects are much more likely to attempt innovation, but the positive impacts of DDD is higher than SM for improving innovation propensity. This finding is robust with respect to the different types of innovation that firms can undertake, and even more pronounced amongst firms with a greater levels of managerial capacity. After controlling for these aspects of management, we find that foreign owned businesses are less likely to attempt innovation, while there is no evidence to support that innovation propensities differ with industry concentration.