How Does the Market Value Management Practices of Japanese Firms? Using Management Practice Survey Data

Chapter

Abstract

This paper examines the extent to which firm’s management practices are valued in the marketplace using the data of interview survey. First, we divide a firm’s market value into its tangible and intangible assets, and further decompose the intangible asset value into the components attributable to advertising, to R&D, and to management practices. We find that the component attributable to management practices is much smaller than the components attributable to R&D or to advertising. We also find that among various management practices, human resource management has a significantly positive impact on Tobin’s q. Some of organizational management variables, however, have significantly negative impacts on Tobin’s q, contrary to the findings of Bloom and Van Reenen (Quarterly Journal of Economics 122:1341–1408, 2007; Journal of Economic Perspectives 24:203–224, 2010) and Bloom et al. (Academy of Management Perspectives 26:12–33, 2012), to which we referred when we conducted interview survey. Then, we further explore the organizational management practice variables to understand why they do not have significantly positive impacts on Tobin’s q. The finer analysis finds that many characteristics of management practices, which are supposed to increase market value of the firms, actually have no significant impact or a negative impact on Tobin’s q. The results suggest that information sharing and coordination within a unit or a team increase the value, while disclosing information and coordinating across units decrease the value. The results also suggest that quick decision making has different impacts on firm’s market value depending upon the contexts. Speedy decision making increases the value in case of new business development, while consultation with the people concerned increases firm’s market value in case of closing the existing business. The different results of this study from the existing ones may suggest that good management practices are different among countries.

Keywords

Management practices Intangible assets Decomposition 

References

  1. Aaker, D. A. (1991). Managing brand equity. New York: Free Press.Google Scholar
  2. Aoki, M. (1988). Information, incentives, and bargaining in the Japanese economy. New York: Cambridge University Press.CrossRefGoogle Scholar
  3. Aoki, M. (2010). Corporations in evolving diversity: Cognition, governance, and institutions. New York: Oxford University Press.CrossRefGoogle Scholar
  4. Argyres, N. (1996). Capabilities, technological diversification and divisionalization. Strategic Management Journal, 17, 295–410.CrossRefGoogle Scholar
  5. Bloom, N., Genakos, C., Sadun, R., & Van Reenen, J. (2012). Management practices across firms and countries. Academy of Management Perspectives, 26, 12–33.CrossRefGoogle Scholar
  6. Bloom, N., & Van Reenen, J. (2007). Measuring and explaining management practices across firms and countries. Quarterly Journal of Economics, 122, 1341–1408.CrossRefGoogle Scholar
  7. Bloom, N., & Van Reenen, J. (2010). Why do management practices differ across firms and countries? Journal of Economic Perspectives, 24, 203–224.CrossRefGoogle Scholar
  8. Brynjolfsson, E., & Hitt, L. (1995). Information technology as a factor of production: The role of differences among firms. Economics of Innovation and New Technology, 3, 183–200.CrossRefGoogle Scholar
  9. Corrado, C., Hulten, C., & Sichel, D. (2005). Measuring capital and technology: An extended framework. In C. Corrado, J. Haltiwanger, & D. Sichel (Eds.), Measuring capital in the new economy. Chicago: University of Chicago Press.CrossRefGoogle Scholar
  10. Corrado, C., Hulten, C., & Sichel, D. (2009). Intangible capital and U.S. economic growth. The Review of Income and Wealth, 55, 661–685.CrossRefGoogle Scholar
  11. Helfat, C. E. (1994). Evolutionary trajectories in petroleum firm R&D. Management Science, 40, 1720–1747.CrossRefGoogle Scholar
  12. Helfat, C. E. (1997). Know-how and asset complementarity and dynamic capability-accumulation: The case of R&D. Strategic Management Journal, 18, 339–360.CrossRefGoogle Scholar
  13. Henderson, R. M., & Cockburn, I. (1994). Measuring competence? Exploring firm effects in pharmaceutical research. Strategic Management Journal, 15(Summer Special Issue), 63–84.CrossRefGoogle Scholar
  14. Hori, K., Saito, M., & Ando, K. (2004). 1990 Nendai no Setsubi Toshi Teimei no Haikei nitsuite: Zaimu Data wo Mochiita Panel Bunseki (On the cause of fixed investment stagnation during the 1990s in Japan: Evidence from panel data of the financial statements). Economics Today, 25(4), 1–70 (in Japanese).Google Scholar
  15. Ito, K. (2000). Corporate Brand Keiei (Corporate brand management). Tokyo: Nihon Keizai Shimbunsha (in Japanese).Google Scholar
  16. Kawakami, A., & Asaba, A. (2013). How does the market value management practices? Decomposition of intangible assets (RIETI Discussion Paper Series 13-E-044)Google Scholar
  17. Konar, S., & Cohen, M. A. (2001). Does the market value environmental performance? The Review of Economics and Statistics, 83, 281–289.CrossRefGoogle Scholar
  18. Lindenberg, E. B., & Ross, S. A. (1981). Tobin’s q ratio and industrial organization. Journal of Business, 54, 1–32.CrossRefGoogle Scholar
  19. Litov, L., Moreton, P., & Zenger, T. R. (2012). Corporate strategy, analyst converge, and the uniqueness paradox. Management Science, 58, 1797–1815.CrossRefGoogle Scholar
  20. Miyagawa, T., Lee, K., Kabe, S., Lee, J., Kim, H., Kim, Y., et al. (2010). Management practice and firm performance in Japanese and Korean firms – An empirical study using interview survey (RIETI Discussion Paper 10-e-013).Google Scholar
  21. Miyagawa, T., Takizawa, M., & Edamura, K. (2012). Does the stock market evaluate intangible assets? – An empirical analysis using listed firm data in Japan. Mimeo. Google Scholar
  22. Nonaka, I., & Takeuchi, H. (1995). The knowledge-creating company: How Japanese companies create the dynamics of innovation. New York: Oxford University Press.Google Scholar
  23. Reed, R., & DeFillipi, R. J. (1990). Causal ambiguity, barriers to imitation and sustainable competitive advantage. Academy of Management Review, 15, 88–102.Google Scholar
  24. Rumelt, R. P. (1984). Toward a strategic theory of the firm. In R. Lamb (Ed.), Competitive strategic management. Englewood Cliffs, NJ: Prentice-Hall.Google Scholar
  25. Simon, C. J., & Sullivan, M. W. (1993). The measurement and determinants of brand equity: A financial approach. Marketing Science, 12, 28–52.CrossRefGoogle Scholar
  26. Villalonga, B. (2004). Intangible resources, Tobin’s q, and sustainability of performance differences. Journal of Economic Behavior & Organization, 54, 205–230.CrossRefGoogle Scholar
  27. Wooldridge, J. M. (2001). Econometric analysis of cross section and panel data. Cambridge, MA: MIT Press.Google Scholar

Copyright information

© Springer International Publishing Switzerland 2015

Authors and Affiliations

  1. 1.Gakushuin UniversityTokyoJapan
  2. 2.Waseda UniversityTokyoJapan

Personalised recommendations