(more formal, frequent and explicit) adoption of all structured management practice, and 0 score reflects the other extreme.

Analysis of this newly collected survey data in Croatia, suggests that, _first,_ an average manufacturing firm in Croatia scores 0.538 in adoption of advanced management practices, a value behind the one in frontier economies such as the United States (0.615, Bloom et al., 2019a). Comparing Croatia’s management practices with countries for which comparable data is available<sup>5</sup> , we find that an average manufacturing firm in Croatia is better managed than its counterparts in Russia (average score, 0.432; Grover and Torre, 2019) and Mexico (average score, 0.42; Bloom et al., 2019b) ( **Tables 1a and 1b** ), although we are concerned that the relatively higher score in Croatia vis-à-vis Mexico, for instance, could be the result of low response rate, leading to a possible selection bias and due to differences in coverage with respect to firm size in the sampling frame.<sup>6</sup> Moreover, the quality of management practices across firms in Croatia is highly heterogeneous, with a large share of poorly managed firms and a much smaller share of better managed firms, relative to advanced countries. For example, only 3.5 percent of the firms in Croatia have a management score of over 0.75 as compared to 18 percent in the US.

_Second,_ weaknesses in management practices, particularly relating to data driven performance monitoring, cripples the overall management score in Croatia. Monitoring includes specific practices that help managers define their key performance indicators (e.g. inventory, sales, absenteeism) and appropriately track them periodically over time. By comparison, Croatia’s average score on practices relating to target setting and incentives is relatively closer to that in the United States firms. Incentives practices relate to how managers and non-managers are awarded bonuses and promotion, for instance. The finding for Croatia regarding the weaknesses of these sub-indices is similar to that in Russian manufacturing, that is, monitoring aspect of structured management is weaker. By comparison, in the United States and Mexico

> 5 Apart from data availability, it makes sense to compare Croatia with Russia due to comparable per capita GDP in recent years and also the fact that both countries are transition economies in the same region. Comparison with Mexico is revealing in the sense that Mexico has a lower per capita GDP than Croatia, but has a strong manufacturing base, and thus offers another perspective for comparison (lower bound among emerging economies), aside from the US, which is the benchmark frontier economy (upper bound).

> 6 For comparator countries, the sample frame varies significantly. For example, MOPS in the United States used the sample frame of the Annual survey of manufacturing, comprising of around 50,000 plants in each wave for the years 2010 and 2015. Nearly 74,000 responses for the two years were received, that is, an average response rate of 74 percent. Likewise, in Mexico the survey was conducted for nearly 25,000 firms in manufacturing and services, with a response rate of 96 percent. The survey in Russia is perhaps closest to that in Croatia where 727 firms were interviewed face to face across five broad regions, with response rate similar to that in Russia (about 17 percent). Although the survey in Croatia covered both manufacturing and services, in this paper we present comparisons with manufacturing only. It is also worth reminding that although much of the lagging regions in Russia is not surveyed, the survey also skips bigger cities and agglomerations such as Moscow, Moscow Oblast, Saint Petersburg and Leningrad Oblast. Due to restricted coverage on location and size of the firms in Russia, management score could go in either direction. For example, we do not cover smaller firms (less than 25 employees) in Russia (which are covered in both Mexico and the US), and likewise, we do not cover much of the lagging regions in Russia as well. A broader coverage could therefore also pull down the current management score, depending on the share of firms that is added on either end of the location or size distribution. Furthermore, as we will learn later in the paper, a low response rate in Russia is likely leading to an overestimation of the observed management score.