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Intangibles, Market Failure and Innovation Performance

pp 193-216

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

  • Atsushi KawakamiAffiliated withGakushuin University
  • , Shigeru AsabaAffiliated withWaseda University Email author 

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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