Management practices and firm performance during the Great Recession – Evidence from Spanish survey data
Prof. Florian Englmaier
Professor of Organizational Economics
Department of Economics
LMU Munich
ABSTRACT
This paper empirically examines whether management practices that work well during an economic boom are also e ective in times of economics crisis, using plant-level survey data collected in Spain in 2006 just prior to the Great Recession. By employing unsupervised machine learning, we leverage high-dimensional human resource policies at each plant to describe clusters of management practices (“management styles”). We establish a positive correlation of a management style associated with structured management with performance prior to the crisis starting in 2006. Even accounting for firm survival, this correlation turns negative during the financial crisis. Further results suggest that more structured management correlates with relatively higher holdings of non-liquid assets and lower employee turnover. This suggests that a structured management style allows firms to strive during a boom but may be an impediment to adjusting to rapidly deteriorating economic conditions.
