Determinants of quality management practices: An empirical study of New Zealand manufacturing firms

A large body of research in recent years has resulted in the accumulation of knowledge about better (worse) management practices for manufacturing firms. Given the wide dissemination of knowledge about practices such as Lean Manufacturing, the importance of goal‐setting, performance management systems, employee promotion and reward structures, it is unclear why some firms do not adopt these broad‐based management practices. If there are management practices that have the potential to universally increase productivity of manufacturing firms, their lack of adoption by all firms in such markets remains a pertinent question. New Zealand is a small open economy facing competitive pressure from both its geographical distance from large markets and its minimum wage, which is above key international competitors. In this context we use a novel survey tool designed by Bloom and Van Reenen (2007) and McKinsey & Co. to construct a Management Practices Score (MPS) based on 18 management practices from 152 medium‐ and large‐sized New Zealand manufacturing firms. We find that the MPS is positively associated with various firm productivity performance indicators, particularly profit per employee and firm sales, indicating that the MPS captures relevant information about management practices. We find that firm size, ownership structure, and the level of education among both managers and non‐managers positively impacts management performance. Unlike the findings in earlier international research, we find that competition does not have an association with management practices. The findings here contribute to understanding why best management practices are not universally adopted by manufacturing firms.