Corporate Organizational Reform and Corporate Performance: Empirical analysis based on interviews with Tokyo-area firms

Author Name MIYAGAWA Tsutomu  (Faculty Fellow, RIETI) /OZAKI Masahiko  (Senior Fellow, RIETI) /KAWAKAMI Atsushi  (Gakushuin University) /EDAMURA Kazuma  (Hitotsubashi University)
Creation Date/NO. December 2008 08-J-062
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In tandem with the advance of IT usage in the economy and society, it is becoming more widely recognized that for greater IT usage to lead to higher productivity it is essential not only to increase the amount of IT equipment, but also for corporate organizations and human resources to correspond with new technological innovation of the kind represented by the enhanced use of IT. Based on this perception, in this paper we emulate the company interviews conducted by Bloom and Van Reenen (2007) by carrying out an independent interview-based survey of firms' organizational management and human resource management. Using the results of those interviews, we then quantify them by awarding higher scores when organizational goals are more diffused between the upper echelons and the workplace, when organizational reforms have been implemented in recent years, and also when companies have human resource management that respond quickly to individuals' job performances.

Our survey covers 151 Tokyo-based firms in four industries in the manufacturing sector (electrical machinery, equipment and supplies manufacturing; information and communications electronics equipment manufacturing; motor vehicles, parts and accessories manufacturing; and precision instruments and machinery manufacturing) and three in the service sector (video picture and sound information production, information services, and retailing), and the results of this survey show that the largest number of companies have scores that are close to the overall median. Broken down by industry, in the manufacturing industry there are numerous companies that have high scores with respect to organization, but with regard to human resources there are also many companies that are conservative. In the retailing industry, meanwhile, there are numerous companies that are flexible with regard to human resources. Examining the relationship between these scores and corporate performance, we find that estimates based only on the arithmetic average of the scores produce no significant results. Nevertheless, significant results are achieved with regard to cross terms between scores and a dummy at two years after organizational reform. This is the same when taking the main components and regarding them as explained variables. Given this, simply having transparency in an organization and flexibility in its personnel management system will not lead to greater productivity; if the degree of transparency of an organization is higher at least two years after it undergoes reforms, and the human resources management is made flexible, its impact will be to enhance productivity.