The effects of competition on management practices in New Zealand–a study of manufacturing firms

Competition is a key factor in driving performance improvements across a range of firm activities including reductions in costs, increasing the levels of productivity, promoting entrepreneurial efforts, fostering innovation, driving better management practices, and exercising strategic managerial decisions. The questions of how and why competitive market forces influence management practices are the focus of this paper. Using data on management practices from 152 New Zealand manufacturing firms, and competition data obtained for various industries of the NZ economy, we examine the association between different dimensions of competition and management practices. Notably, we find little or no association between better management practices and competition when utilising simpler measures of competition, namely the number of competitors, industry concentration measured by HHI and the price-cost margin are used. However, using a more refined measure of competition, competition intensity characterised by profit elasticity, has a positive and significant association with the quality of management practices adopted by firms.