The effect of management practices on the performance of bus companies

Author Name KAWASAKI Kazuyasu (Chuo University) / INUI Tomohiko (Faculty Fellow, RIETI) / MIYAGAWA Tsutomu (Faculty Fellow, RIETI)
Creation Date/NO. September 2019 19-J-051
Research Project Research on Productivity-improving Capital Investment
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Bloom and Van Reenen (2007) studied the relationship between management practices and firm performance. Their study focused on manufacturing and showed that management score had a positive impact on firm performance.

In this paper, we analyze the relationship between management practices and firm performance in the bus industry. In Japan, bus service is a public utility provided by both private and public companies, and they are regulated by the Japanese government.

We find that public companies have better management practices than private ones. With output index as the dependent variable, we obtain a positive and significant coefficient on the management practice score. When the dependent variable is changed to value added index, we obtain a positive coefficient, but not at a level of significance. Because the bus industry is a regulated industry, they cannot expect to increase profits based solely on providing better service.

In order to achieve better firm performance within the Japanese bus industry, we find that improving the whole of an organization's operations is more effective than providing incentives to individual employees.