Countries such as the Russian Federation were, in general, not exposed to market forces until the beginning of the 1990s and state-owned enterprises (SOEs) still continue to play a significant role in the domestic economy.<sup>1</sup> Thus, it is not clear that the link between management practices and firm performance can be found in transition countries as well. Following the four core management areas from Bloom and Van Reenen (2007), the European Bank for Reconstruction and Development (EBRD), in cooperation with the World Bank, conducted a survey on Management, Organization and Innovation (MOI) for 10 transition economies, including Russia.<sup>2</sup> The results of the face-to-face interviews conducted with 1,874 factory managers were benchmarked against Germany and India. Using the MOI survey on all transition economies, Bloom et al. (2011) suggest that an improvement in management practices scores from the lower to the upper quartile of the distribution is associated with a 9 percent increase in operating revenue,<sup>3</sup> an over 85 percent increase in profit margins<sup>4</sup> and an increase in the return on total assets<sup>5</sup> by almost 20 percent.<sup>6</sup> Friebel and Schweiger (2012) specifically use the MOI survey data on 311 Russian firms to assess the importance of managerial quality on firm performance in Russia.<sup>7</sup> Their work suggests that differences in managerial quality, as measured by the four core management areas, explain relatively little in terms of variation in overall firm performance, however, it does explain some of the regional differences between firms in Russia’s Far East and the rest of Russia. Furthermore, they argue that exposure to foreign competition, both in the product market and the labor market, explains the variation in adoption of good management practices across firms and broad regions.

To quantify the importance of management on the performance of Russian firms and identify potential avenues for boosting firm productivity, during July-October 2018 we conducted a survey on managerial practices in Russia using a slightly modified version of the US Census Management and Organizational <u>Practices Survey (MOPS). The survey was deliberately designed to replicate the US Census MOPS to</u> maximize comparability with the US as well as other countries where this survey has been conducted (e.g. Mexico and Punjab province in Pakistan, UK, Canada, Japan, China and Croatia). In consultations with the Russian authorities, the survey collects data on 978 small-medium sized manufacturing firms ranging from

> 1 Despite problems in identifying the actual role of the state sector in the economy, even by moderate assessment state-owned enterprises and state corporations present much more than 20% of Russia`s GDP (by some expert assessment up to 50% considering subsidiaries, affiliates, minority shares in different assets, etc.) and almost half of all internal procurements (Danilin, 2015).

> 2 The other 9 countries include - Belarus, Bulgaria, Kazakhstan, Lithuania, Poland, Romania, Serbia, Ukraine and Uzbekistan. The survey was modeled in a way that is similar to MOPS.

> 3 Operating revenue is the income or sales generated from a firm’s day-to-day business activities, that is, it is the revenue posted from selling the firm’s products and services.

> 4 Profit margin is computed as the firm’s net profit per unit of sale.

> 5 Return on assets is defined as the ratio of net income (profit after taxes) over total assets of the firm.

> 6 As in Bloom’s earlier works, the differences in the quality of management practices can be explained by competition, the availability of human capital available, and ownership.

> 7 Case studies on management practices of Russian agri-business enterprises almost two decades ago revealed that management practices that were unsanctioned earlier had just begun to permeate Russian management structures by the turn of the century. Though these practices were not found to be widely successful, the interviewed managers found some of these practices to be related to their firms’ competitiveness (Chacko and Wacker, 2001).

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