Management matters

To evaluate the effect of managerial innovations on the economy, a series of new indicators capturing these advances is constructed. Three findings emerge from the analysis. First, following a positive managerial shock, output and productivity significantly increase and hours modestly rise in the short run. Second, management innovations are generally as important as non-managerial ones in explaining movements in these variables at business cycle frequencies. Finally, product and process innovations help to promote the development of new managerial techniques.