The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Knowledge Sharing & IndividualPerformance:

Evidence from a Japanese Bank

Marco Di Maggio and Marshall Van Alstyne

MIT Economics Dept. & Boston University and MIT

NSF Grant #0925004

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

The Motivation: Productivity

I In U.S. manufacturing, the average difference in productivitybetween the highest and lowest percentiles is roughly 1.92 andthe autoregressive coefficients are on the order of 0.6 to 0.8.

I Existing research has linked productivity to a number offactors e.g. technology, demand, human capital and marketstructure.

I However, to create persistent performance differences theadvantageous inner workings must be difficult to imitate.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

The Motivation: Productivity

I In U.S. manufacturing, the average difference in productivitybetween the highest and lowest percentiles is roughly 1.92 andthe autoregressive coefficients are on the order of 0.6 to 0.8.

I Existing research has linked productivity to a number offactors e.g. technology, demand, human capital and marketstructure.

I However, to create persistent performance differences theadvantageous inner workings must be difficult to imitate.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

The Motivation: Productivity

I In U.S. manufacturing, the average difference in productivitybetween the highest and lowest percentiles is roughly 1.92 andthe autoregressive coefficients are on the order of 0.6 to 0.8.

I Existing research has linked productivity to a number offactors e.g. technology, demand, human capital and marketstructure.

I However, to create persistent performance differences theadvantageous inner workings must be difficult to imitate.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

The Motivation: Productivity

I This suggests that performance variation might be due tomanagement practices, communication, and individual talentwhich are softer and more informal than factors identified inthe literature.

I Main empirical challenge for economics: the absence ofhigh-quality data on performance and individual practices.

I We have very fine-grained data including every databaseaccess and all individual productivity of bank loan officers fortwo years.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

The Motivation: Productivity

I This suggests that performance variation might be due tomanagement practices, communication, and individual talentwhich are softer and more informal than factors identified inthe literature.

I Main empirical challenge for economics: the absence ofhigh-quality data on performance and individual practices.

I We have very fine-grained data including every databaseaccess and all individual productivity of bank loan officers fortwo years.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

The Motivation: Productivity

I This suggests that performance variation might be due tomanagement practices, communication, and individual talentwhich are softer and more informal than factors identified inthe literature.

I Main empirical challenge for economics: the absence ofhigh-quality data on performance and individual practices.

I We have very fine-grained data including every databaseaccess and all individual productivity of bank loan officers fortwo years.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

The Question

Does access to shared information increase

the productivity of knowledge workers?

Consider a knowledge management platform for shareddocuments and Q&A

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Outline

1. Data

2. Existence of Persistent Performance Differences (PPDs)

3. Identification Strategy

4. Main Results

5. Robestness

6. Concluding Remarks

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

The Data

I Scope: We collected terabytes of data containing every accessto every document and Q&A exchange at a major Japanesebank.

I Observations: Our data include all loan officers, roughly 2800people, located across 290 branches. We also have individualloan performance data, and tenure at the bank.

I Multi-Level:We also have branch data. Branches vary in size(7-110) and primary type of business, mainly due to location.

I Work Context: Six main groups to which each loan officermight belong: large existing account, small existing account,restructuring group, public sector, new strategic account, andnew account.

I Time period: October 2006 - September 2008.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Individual Output Measures

Quantitative

I bank gross profit

I individual loan profit

I liquid deposit profit

I loan volume

I reduced disclosed debt

I reduced estimated losses

Bank headquarters set branchtargets, passed to loan officers.

Qualitative

I customer service

I contribution to branchoperations

I contribution toorganization operations

I loan reinforcement

Branch manager evaluation ofindividual officers.

Loan officer performance is reviewed semi-annually.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Q&A Example

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Alternate Explanations

Table: Competing Hypotheses

Questions Answers

H1:People who ask questions get H3:People who answer questionsuseful advice, reduce search costs signal their greater expertiseand are more productive. and are more productive.

H2:People who ask questions are H4:People who answer questionsinexperienced, less able and are distracted from their workare less productive. and are less productive.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Alternate Explanations

Table: Causal Hypotheses

Questions Answers

H1:People who ask questions get H3:People who answer questionsuseful advice, reduce search costs signal their greater expertiseand are more productive. and are more productive.

H2:People who ask questions are H4:People who answer questionsinexperienced, less able and are distracted from their workare less productive. and are less productive.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Alternate Explanations

Table: Selection Hypotheses

Questions Answers

H1:People who ask questions get H3:People who answer questionsuseful advice, reduce search costs signal their greater expertiseand are more productive. and are more productive.

H2:People who ask questions are H4:People who answer questionsinexperienced, less able and are distracted from their workare less productive. and are less productive.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Summary of the Descriptive Statistics

Individual loan officers (2800)

I On average: 500 (400) documents consulted every term, 78(116) questions posted and 300 (150) answers provided.

I On average: a score of 50 (22) for total performance and 31(17) for quantitative productivity; 10 years of previousexperience in the bank.

Branches (290)

I From 7 to 110 loan officers in each branch. Corr(Y , I d)=.03;Corr(Y , I q)=−.1;Corr(Y , I a)=.3.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Facts: Individual Productivity Differences

0.0

1.0

2.0

30

.01

.02

.03

0 50 100 0 50 100

Term 1 Term 2

Term 3 Term 4

Kernel Density

Den

sity

Total Productivity Density

Kernel Density Estimation

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Facts: Heterogeneity within and between Groups

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Individual Transition Probabilities Are Sticky

Table: Transition Probabilities for Total Performance

<5% 5-25 25-50 50-75 75-95 > 95% Total

<5% 14.78 29.29 29.55 16.89 7.12 2.37 1005-25 6.42 25.61 28.62 22.95 13.25 3.14 10025-50 2.41 19.94 28.06 27.12 18.24 4.24 10050-75 1.59 13.81 26.44 29.33 21.6 7.22 10075-95 1.64 9.83 20.61 25.73 30.58 11.6 100> 95% 1.13 4.51 17.46 21.69 35.77 19.44 100

For a person in bottom 5%, there is a ∼ 15% chance he remainsthere, a ∼ 44% chance he remains in the lowest quartile, but onlya ∼ 2% chance he jumps to the top 5%.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Facts: Lower performers have fewer answers but morequestions.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Empirical Model

Pijkt = α1I dijt + α2I qijt + α3I aijt + βXijt + ε ijt (1)

I Pijkt : Total performance of officer i at branch j in group k attime t.

I I dijt : Number of documents accessed by officer i in branch j interm t.

I I q : Number of questions.

I I a : Number of answers provided.

I Xijt : tenure and indicator for previous experience of officer i ;time, branch, group and individual fixed effects.

I We also allow for non-linear effects and interactions.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Threats to Identification

I Correlation with unobserved shocks over time;

I Solution: we include Time Fixed Effects.

I Information usage is bundled with many other branch-levelmanagement practices.

I Solution: we include Branch Fixed Effects.

I Correlation with unobserved individual characteristics.

I Solution: we shall show Individual Fixed Effects.

I Our measure of information access may be noisy.

I Solution: our estimates identify a lower bound.

I Endogeneity

I Solution: we propose an Instrumental Variable approach.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Threats to Identification

I Correlation with unobserved shocks over time;

I Solution: we include Time Fixed Effects.

I Information usage is bundled with many other branch-levelmanagement practices.

I Solution: we include Branch Fixed Effects.

I Correlation with unobserved individual characteristics.

I Solution: we shall show Individual Fixed Effects.

I Our measure of information access may be noisy.

I Solution: our estimates identify a lower bound.

I Endogeneity

I Solution: we propose an Instrumental Variable approach.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Threats to Identification

I Correlation with unobserved shocks over time;

I Solution: we include Time Fixed Effects.

I Information usage is bundled with many other branch-levelmanagement practices.

I Solution: we include Branch Fixed Effects.

I Correlation with unobserved individual characteristics.

I Solution: we shall show Individual Fixed Effects.

I Our measure of information access may be noisy.

I Solution: our estimates identify a lower bound.

I Endogeneity

I Solution: we propose an Instrumental Variable approach.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Threats to Identification

I Correlation with unobserved shocks over time;

I Solution: we include Time Fixed Effects.

I Information usage is bundled with many other branch-levelmanagement practices.

I Solution: we include Branch Fixed Effects.

I Correlation with unobserved individual characteristics.

I Solution: we shall show Individual Fixed Effects.

I Our measure of information access may be noisy.

I Solution: our estimates identify a lower bound.

I Endogeneity

I Solution: we propose an Instrumental Variable approach.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Threats to Identification

I Correlation with unobserved shocks over time;

I Solution: we include Time Fixed Effects.

I Information usage is bundled with many other branch-levelmanagement practices.

I Solution: we include Branch Fixed Effects.

I Correlation with unobserved individual characteristics.

I Solution: we shall show Individual Fixed Effects.

I Our measure of information access may be noisy.

I Solution: our estimates identify a lower bound.

I Endogeneity

I Solution: we propose an Instrumental Variable approach.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Threats to Identification

I Correlation with unobserved shocks over time;

I Solution: we include Time Fixed Effects.

I Information usage is bundled with many other branch-levelmanagement practices.

I Solution: we include Branch Fixed Effects.

I Correlation with unobserved individual characteristics.

I Solution: we shall show Individual Fixed Effects.

I Our measure of information access may be noisy.

I Solution: our estimates identify a lower bound.

I Endogeneity

I Solution: we propose an Instrumental Variable approach.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Threats to Identification

I Correlation with unobserved shocks over time;

I Solution: we include Time Fixed Effects.

I Information usage is bundled with many other branch-levelmanagement practices.

I Solution: we include Branch Fixed Effects.

I Correlation with unobserved individual characteristics.

I Solution: we shall show Individual Fixed Effects.

I Our measure of information access may be noisy.

I Solution: our estimates identify a lower bound.

I Endogeneity

I Solution: we propose an Instrumental Variable approach.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Threats to Identification

I Correlation with unobserved shocks over time;

I Solution: we include Time Fixed Effects.

I Information usage is bundled with many other branch-levelmanagement practices.

I Solution: we include Branch Fixed Effects.

I Correlation with unobserved individual characteristics.

I Solution: we shall show Individual Fixed Effects.

I Our measure of information access may be noisy.

I Solution: our estimates identify a lower bound.

I Endogeneity

I Solution: we propose an Instrumental Variable approach.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Threats to Identification

I Correlation with unobserved shocks over time;

I Solution: we include Time Fixed Effects.

I Information usage is bundled with many other branch-levelmanagement practices.

I Solution: we include Branch Fixed Effects.

I Correlation with unobserved individual characteristics.

I Solution: we shall show Individual Fixed Effects.

I Our measure of information access may be noisy.

I Solution: our estimates identify a lower bound.

I Endogeneity

I Solution: we propose an Instrumental Variable approach.

Knowledge and Performance MIT Economics Dept. & Boston University and MIT

The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Threats to Identification

I Correlation with unobserved shocks over time;

I Solution: we include Time Fixed Effects.

I Information usage is bundled with many other branch-levelmanagement practices.

I Solution: we include Branch Fixed Effects.

I Correlation with unobserved individual characteristics.

I Solution: we shall show Individual Fixed Effects.

I Our measure of information access may be noisy.

I Solution: our estimates identify a lower bound.

I Endogeneity

I Solution: we propose an Instrumental Variable approach.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Dependent Variable: Log of Performance

Table: Panel Model I – Fixed Effects Estimates

Log(Tot. Performance) (1) (2) (3) (4) (5)Log(Number Documents) 0.0493*** 0.0562*** 0.0226** 0.0300*** 0.0216**

(0.0103) (0.0106) (0.0104) (0.0107) (0.0109)Log(Number Questions) -0.0505*** -0.0335*** -0.0246*** -0.0217*** -0.0195***

(0.00452) (0.00506) (0.00498) (0.00504) (0.00519)Log(Number Answers) 0.0508*** 0.00848 0.00533 0.00337 0.00475

(0.00301) (0.0065) (0.0064) (0.00643) (0.00692)Log(Tenure) 0.0632*** 0.0674*** 0.105*** 0.100*** 0.1000***

(0.0086) (0.00862) (0.00848) (0.00827) (0.00812)College 0.108*** 0.113*** 0.105*** 0.0924*** 0.0891***

(0.0276) (0.0276) (0.0263) (0.0258) (0.0255)Time Fixed Effects YES YES YES YESGroup Fixed Effects YES YES YESBranch Fixed Effects YES YESTime * Branch Fixed Effects YESObservations 9,805 9,805 9,805 9,805 9,805Number of Officers 2,916 2,916 2,916 2,916 2,916R-squared 0.0629 0.0582 0.1567 0.3049 0.467

I Tenure and college freshness both significant.

I One standard deviation rise in document access predicts 11% rise in output.I One standard deviation rise in questions predicts 5% fall in output.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Dependent Variable: Log of Performance

Table: Panel Model I – Fixed Effects Estimates

Log(Tot. Performance) (1) (2) (3) (4) (5)Log(Number Documents) 0.0493*** 0.0562*** 0.0226** 0.0300*** 0.0216**

(0.0103) (0.0106) (0.0104) (0.0107) (0.0109)Log(Number Questions) -0.0505*** -0.0335*** -0.0246*** -0.0217*** -0.0195***

(0.00452) (0.00506) (0.00498) (0.00504) (0.00519)Log(Number Answers) 0.0508*** 0.00848 0.00533 0.00337 0.00475

(0.00301) (0.0065) (0.0064) (0.00643) (0.00692)Log(Tenure) 0.0632*** 0.0674*** 0.105*** 0.100*** 0.1000***

(0.0086) (0.00862) (0.00848) (0.00827) (0.00812)College 0.108*** 0.113*** 0.105*** 0.0924*** 0.0891***

(0.0276) (0.0276) (0.0263) (0.0258) (0.0255)Time Fixed Effects YES YES YES YESGroup Fixed Effects YES YES YESBranch Fixed Effects YES YESTime * Branch Fixed Effects YESObservations 9,805 9,805 9,805 9,805 9,805Number of Officers 2,916 2,916 2,916 2,916 2,916R-squared 0.0629 0.0582 0.1567 0.3049 0.467

I Tenure and college freshness both significant.I One standard deviation rise in document access predicts 11% rise in output.

I One standard deviation rise in questions predicts 5% fall in output.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Dependent Variable: Log of Performance

Table: Panel Model I – Fixed Effects Estimates

Log(Tot. Performance) (1) (2) (3) (4) (5)Log(Number Documents) 0.0493*** 0.0562*** 0.0226** 0.0300*** 0.0216**

(0.0103) (0.0106) (0.0104) (0.0107) (0.0109)Log(Number Questions) -0.0505*** -0.0335*** -0.0246*** -0.0217*** -0.0195***

(0.00452) (0.00506) (0.00498) (0.00504) (0.00519)Log(Number Answers) 0.0508*** 0.00848 0.00533 0.00337 0.00475

(0.00301) (0.0065) (0.0064) (0.00643) (0.00692)Log(Tenure) 0.0632*** 0.0674*** 0.105*** 0.100*** 0.1000***

(0.0086) (0.00862) (0.00848) (0.00827) (0.00812)College 0.108*** 0.113*** 0.105*** 0.0924*** 0.0891***

(0.0276) (0.0276) (0.0263) (0.0258) (0.0255)Time Fixed Effects YES YES YES YESGroup Fixed Effects YES YES YESBranch Fixed Effects YES YESTime * Branch Fixed Effects YESObservations 9,805 9,805 9,805 9,805 9,805Number of Officers 2,916 2,916 2,916 2,916 2,916R-squared 0.0629 0.0582 0.1567 0.3049 0.467

I Tenure and college freshness both significant.I One standard deviation rise in document access predicts 11% rise in output.I One standard deviation rise in questions predicts 5% fall in output.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Loan Officer Fixed Effects

Table: Panel Model II - Individual Fixed Effects

Log(Tot. Performance) (1) (2) (3) (4) (5)Log(Number Documents) 0.0480*** 0.0430*** 0.0467*** 0.0292* 0.0374**

(0.0104) (0.0161) (0.0172) (0.0171) (0.0178)Log(Number Questions) -0.0543*** -0.0408*** -0.0176** -0.0153** -0.0104

(0.00452) (0.00664) (0.00708) (0.00702) (0.00715)Log(Number Answers) 0.0511*** 0.0519*** -0.00604 -0.00668 -0.0062

(0.00301) (0.00326) (0.00741) (0.00733) (0.00748)Individual Fixed Effects YES YES YES YESTime Fixed Effects YES YES YESGroup Fixed Effects YES YESBranch Fixed Effects YESObservations 9,806 9,806 9,806 9,806 9,806R-squared 0.032 0.048 0.059 0.081 0.157

I Number of questions is no longer significant.

I But, effect of document access is even larger.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Loan Officer Fixed Effects

Table: Panel Model II - Individual Fixed Effects

Log(Tot. Performance) (1) (2) (3) (4) (5)Log(Number Documents) 0.0480*** 0.0430*** 0.0467*** 0.0292* 0.0374**

(0.0104) (0.0161) (0.0172) (0.0171) (0.0178)Log(Number Questions) -0.0543*** -0.0408*** -0.0176** -0.0153** -0.0104

(0.00452) (0.00664) (0.00708) (0.00702) (0.00715)Log(Number Answers) 0.0511*** 0.0519*** -0.00604 -0.00668 -0.0062

(0.00301) (0.00326) (0.00741) (0.00733) (0.00748)Individual Fixed Effects YES YES YES YESTime Fixed Effects YES YES YESGroup Fixed Effects YES YESBranch Fixed Effects YESObservations 9,806 9,806 9,806 9,806 9,806R-squared 0.032 0.048 0.059 0.081 0.157

I Number of questions is no longer significant.

I But, effect of document access is even larger.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Quantile Regression Estimates

Quantθ (yijt |·) = α1θI dijt + α2θI qijt + α3θI aijt + βθXijt + ε ijt (2)

I All variables are as previously defined.

I Bootstrapped standard errors based on 1000 replications.

I Effect of document, question, and answer access on loanofficer performance at the θth conditional quantile of logperformance is measured by vector αθ.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Table: Quantile Regression Estimates

Log(Total Performance) 10th 25th 50th 75th 90th

Log(Number Documents) 0.0391** 0.0409*** 0.0250* 0.002 -0.012(0.017) (0.012) (0.014) (0.013) (0.010)

Log(Number Questions) -0.0207*** -0.0251*** -0.0372*** -0.0361*** -0.0164***(0.007) (0.008) (0.007) (0.006) (0.006)

Log(Number Answers) 0.004 0.008 0.013 0.0209** 0.006(0.010) (0.012) (0.012) (0.009) (0.007)

Observations 9,805 9,805 9,805 9,805 9,805

I Effect of document access is 0 for top two quantiles, but positive and significantfor bottom three quantiles. A 10% increase is associated with a rise inperformance of at least 20%.

I Effect of questions is negative and significant across all quantiles.

I Information access appears to help loan officers in the left tail of the distributionbut is not significant for officers in the right tail.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Table: Quantile Regression Estimates

Log(Total Performance) 10th 25th 50th 75th 90th

Log(Number Documents) 0.0391** 0.0409*** 0.0250* 0.002 -0.012(0.017) (0.012) (0.014) (0.013) (0.010)

Log(Number Questions) -0.0207*** -0.0251*** -0.0372*** -0.0361*** -0.0164***(0.007) (0.008) (0.007) (0.006) (0.006)

Log(Number Answers) 0.004 0.008 0.013 0.0209** 0.006(0.010) (0.012) (0.012) (0.009) (0.007)

Observations 9,805 9,805 9,805 9,805 9,805

I Effect of document access is 0 for top two quantiles, but positive and significantfor bottom three quantiles. A 10% increase is associated with a rise inperformance of at least 20%.

I Effect of questions is negative and significant across all quantiles.

I Information access appears to help loan officers in the left tail of the distributionbut is not significant for officers in the right tail.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Table: Quantile Regression Estimates

Log(Total Performance) 10th 25th 50th 75th 90th

Log(Number Documents) 0.0391** 0.0409*** 0.0250* 0.002 -0.012(0.017) (0.012) (0.014) (0.013) (0.010)

Log(Number Questions) -0.0207*** -0.0251*** -0.0372*** -0.0361*** -0.0164***(0.007) (0.008) (0.007) (0.006) (0.006)

Log(Number Answers) 0.004 0.008 0.013 0.0209** 0.006(0.010) (0.012) (0.012) (0.009) (0.007)

Observations 9,805 9,805 9,805 9,805 9,805

I Effect of document access is 0 for top two quantiles, but positive and significantfor bottom three quantiles. A 10% increase is associated with a rise inperformance of at least 20%.

I Effect of questions is negative and significant across all quantiles.

I Information access appears to help loan officers in the left tail of the distributionbut is not significant for officers in the right tail.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Dependent Variable: Qualitative Measure

Table: Panel Model III - Qualitative Performance Measure

Log(Qualitative Performance) (1) (2) (3) (4) (5)Log(Number Documents) 0.0587*** 0.0616*** 0.0416*** 0.0382*** 0.0459***

(0.00872) (0.00866) (0.00866) (0.00894) (0.0157)Log(Number Questions) -0.0812*** -0.0251*** -0.0171*** -0.0188*** -0.00715

(0.00383) (0.00421) (0.00419) (0.00427) (0.0063)Log(Number Answers) 0.139*** 0.00157 -0.001 4.76E-05 -0.00969

(0.00271) (0.00554) (0.00551) (0.00554) (0.00659)Log(Tenure) 0.0648*** 0.0791*** 0.100*** 0.104***

(0.0069) (0.00683) (0.00687) (0.00676)College 0.0654*** 0.0752*** 0.0747*** 0.0641***

(0.0224) (0.022) (0.0214) (0.0212)Time Fixed Effects YES YES YES YESGroup Fixed Effects YES YES YESBranch Fixed Effects YES YESIndividual Fixed Effects YESObservations 9,801 9,801 9,801 9,801 9,801R-squared 0.3023 0.3692 0.3716 0.3965 0.421

Restricting the model to qualitative estimates of performance leaves the key results

unchanged.

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Promotion & Advancement

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Promotion

Table: Promotion Probability

Promotion (Probit) (1) (2) (3) (4)Number Documents 3.63E-06 3.40E-06 4.61E-06 9.43E-05

(3.77E-06) (4.00E-06) (3.56E-06) (0.00021)Number Questions -0.00172** -0.00174** -0.00154** -0.00245**

(0.000719) (0.000718) (0.00069) (0.00099)Number Answers 0.00106*** 0.00107*** 0.00106*** 0.00153***

(2.88E-04) (2.87E-04) (0.00029) (0.00041)Lag Productivity 0.00194 0.00177 0.00152 0.00146

(0.00205) (0.00203) (0.00207) (0.00252)Tenure 0.107*** 0.107*** 0.108*** 0.148***

(0.00963) (0.00967) (0.00965) (0.0164)College -0.227 -0.229 -0.22 -0.294

(0.254) (0.254) (0.258) (0.267)Time Fixed Effects YES YES YESGroup Fixed Effects YES YESBranch Fixed Effects YESObservations 6,971 6,971 6,971 6,971

I We observe just over 200 promotions. Tenure is by far the largest predictor.

I Lagged productivity is not significant.I Loan officers might be signaling via answers in the data.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Promotion

Table: Promotion Probability

Promotion (Probit) (1) (2) (3) (4)Number Documents 3.63E-06 3.40E-06 4.61E-06 9.43E-05

(3.77E-06) (4.00E-06) (3.56E-06) (0.00021)Number Questions -0.00172** -0.00174** -0.00154** -0.00245**

(0.000719) (0.000718) (0.00069) (0.00099)Number Answers 0.00106*** 0.00107*** 0.00106*** 0.00153***

(2.88E-04) (2.87E-04) (0.00029) (0.00041)Lag Productivity 0.00194 0.00177 0.00152 0.00146

(0.00205) (0.00203) (0.00207) (0.00252)Tenure 0.107*** 0.107*** 0.108*** 0.148***

(0.00963) (0.00967) (0.00965) (0.0164)College -0.227 -0.229 -0.22 -0.294

(0.254) (0.254) (0.258) (0.267)Time Fixed Effects YES YES YESGroup Fixed Effects YES YESBranch Fixed Effects YESObservations 6,971 6,971 6,971 6,971

I We observe just over 200 promotions. Tenure is by far the largest predictor.I Lagged productivity is not significant.

I Loan officers might be signaling via answers in the data.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Promotion

Table: Promotion Probability

Promotion (Probit) (1) (2) (3) (4)Number Documents 3.63E-06 3.40E-06 4.61E-06 9.43E-05

(3.77E-06) (4.00E-06) (3.56E-06) (0.00021)Number Questions -0.00172** -0.00174** -0.00154** -0.00245**

(0.000719) (0.000718) (0.00069) (0.00099)Number Answers 0.00106*** 0.00107*** 0.00106*** 0.00153***

(2.88E-04) (2.87E-04) (0.00029) (0.00041)Lag Productivity 0.00194 0.00177 0.00152 0.00146

(0.00205) (0.00203) (0.00207) (0.00252)Tenure 0.107*** 0.107*** 0.108*** 0.148***

(0.00963) (0.00967) (0.00965) (0.0164)College -0.227 -0.229 -0.22 -0.294

(0.254) (0.254) (0.258) (0.267)Time Fixed Effects YES YES YESGroup Fixed Effects YES YESBranch Fixed Effects YESObservations 6,971 6,971 6,971 6,971

I We observe just over 200 promotions. Tenure is by far the largest predictor.I Lagged productivity is not significant.I Loan officers might be signaling via answers in the data.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Summary of Panel Results

I A standard deviation increase in information access isassociated with an increase in total and qualitativeperformance of 6–10%.

I A standard deviation increase in the number of questions isassociated with a reduction in performance of 4%, while anincrease in answers predicts a performance rise of 2%.

I The probability of being promoted is positively correlated withinformation production and negatively correlated withinformation gathering.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Identification Strategy: Exogenous Variation

I We observe 650 loan officers switching branch. This is aninvoluntary transfer due to a Japanese term limit law toprevent corruption.

I This allows us to disentangle the individual fixed effects fromthe branch fixed effects.

I The identification assumption: the rotation and the allocationto a new branch are not correlated with individual productivity.

I ”Job rotation is quite regular thing for RMs, just like the solarsystem rotate around the sun.” It is not performance based.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Causal Model: The Term Limit

I We can use the average information access at the previousbranch (excluding officer i) at t − 1 as an instrument forinformation access of officer i at time t.

I Motivation: branches differ in their cultural inclinations touse the knowledge platform. Branch 1 instrument correlatedwith information consumption and productivity at branch 1but not branch 2.

I It is invalid if there exists correlation between unobservedability and original assignment to branches.

I It is invalid if the effect of the loan officer on the branchpractices is too strong.

I It is invalid if they learned some other practices from theprevious branch.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Causal Model: The Term Limit

I We can use the average information access at the previousbranch (excluding officer i) at t − 1 as an instrument forinformation access of officer i at time t.

I Motivation: branches differ in their cultural inclinations touse the knowledge platform. Branch 1 instrument correlatedwith information consumption and productivity at branch 1but not branch 2.

I It is invalid if there exists correlation between unobservedability and original assignment to branches.

I It is invalid if the effect of the loan officer on the branchpractices is too strong.

I It is invalid if they learned some other practices from theprevious branch.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Causal Model: The Term Limit

I We can use the average information access at the previousbranch (excluding officer i) at t − 1 as an instrument forinformation access of officer i at time t.

I Motivation: branches differ in their cultural inclinations touse the knowledge platform. Branch 1 instrument correlatedwith information consumption and productivity at branch 1but not branch 2.

I It is invalid if there exists correlation between unobservedability and original assignment to branches.

I It is invalid if the effect of the loan officer on the branchpractices is too strong.

I It is invalid if they learned some other practices from theprevious branch.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Causal Model: The Term Limit

I We can use the average information access at the previousbranch (excluding officer i) at t − 1 as an instrument forinformation access of officer i at time t.

I Motivation: branches differ in their cultural inclinations touse the knowledge platform. Branch 1 instrument correlatedwith information consumption and productivity at branch 1but not branch 2.

I It is invalid if there exists correlation between unobservedability and original assignment to branches.

I It is invalid if the effect of the loan officer on the branchpractices is too strong.

I It is invalid if they learned some other practices from theprevious branch.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Job Rotation

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Switching Increases Demand for Information

Table: Effect of Switching on Document Access

Log(Number Documents) (1) (2) (3) (4)

Switch 0.0199** 0.0218**(0.009) (0.009)

After Switch 0.0125 0.0150*(0.008) (0.008)

Log(Tenure) -0.0218 -0.0217(0.014) (0.014)

College 0.278*** 0.279***(0.042) (0.042)

Time Fixed Effects YES YES YES YESGroup Fixed Effects YES YES YES YESBranch Fixed Effects YES YES YES YESIndividual Fixed Effects YES YESR-squared 0.3342 0.347 0.334 0.346Observations 10,055 10,055 10,055 10,055

Increase in demand for documents on changing jobs is consistent with a

learning hypothesis that diminishes over time.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Table: Effect of Switching on Performance

Log(Total Performance) (1) (2) (3) (4) (5) (6) (7)

Switch -0.111*** -0.0317 -0.118*** -0.0461* -0.108***(0.012) (0.027) (0.012) (0.027) (0.013)

Switch*Tenure -0.00778*** -0.00726***(0.002) (0.002)

After Switch -0.0889*** -0.0915***(0.010) (0.012)

Log(Number Documents) 0.0470*** 0.0469*** 0.0287*** 0.0283*** 0.0274** 0.0387** 0.0348**(0.010) (0.010) (0.010) (0.010) (0.010) (0.018) (0.018)

Log(Number Questions) -0.0515*** -0.0516*** -0.0210*** -0.0210*** -0.0205*** -0.00851 -0.0078(0.005) (0.005) (0.005) (0.005) (0.005) (0.007) (0.007)

Log(Number Answers) 0.0569*** 0.0571*** 0.0059 0.00618 0.00476 -0.00394 -0.0052(0.003) (0.003) (0.006) (0.006) (0.006) (0.007) (0.007)

Log(Tenure) 0.0636*** 0.0700*** 0.0994*** 0.105*** 0.0994***(0.009) (0.009) (0.008) (0.008) (0.008)

College 0.106*** 0.104*** 0.0915*** 0.0907*** 0.0897***(0.027) (0.028) (0.026) (0.026) (0.026)

Time Fixed Effects YES YES YES YES YESGroup Fixed Effects YES YES YES YES YESBranch Fixed Effects YES YES YES YES YESIndividual Fixed Effects YES YESObservations 9,805 9,805 9,805 9,805 9,805 9,805 9,805R-squared 0.0698 0.0701 0.3078 0.308 0.3054 0.166 0.165

Switching jobs appears to significantly reduce performance.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Instrument: Variation in branch attitudes toward information access

Table: First Stages

Documents Answers Questions

Documents Prev Branch 7.398*** -0.654* -0.214(0.744) (0.362) (0.248)

Answers Prev Branch -14.439*** 4.190*** -1.637**(2.282) (1.112) (0.757)

Questions Prev Branch 8.420*** 2.271** 7.437***(2.157) (1.052) (0.718)

Tenure -10.419*** -4.132*** -2.688***(2.622) (1.278) (0.873)

College 54.021 19.242 -2.409(69.580) (33.915) (23.161)

F-Test 50.289 16.774 49.343

Time Fixed effects YES YES YESGroup Fixed Effects YES YES YESObservations 618 618 618

I Document IV specification F-test >> 20⇒ instrument is not weak.I Tenure reduces demand for information.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

IV: Variation in branch attitudes

Table: IV Estimates

(1) (2) (3) (4) (5) (6)Total Performance OLS IV OLS IV OLS IVNumber Documents -0.00123 0.0197** -0.00138 0.0225*** -0.00347 0.0194**

(0.003) (0.008) (0.003) (0.008) (0.003) (0.008)Number Questions -0.0306*** -0.133** -0.0287*** -0.104*** -0.0169** -0.0908***

(0.008) (0.061) (0.008) (0.034) (0.008) (0.033)Number Answers 0.0175*** 0.112 0.0148** 0.0727** 0.0114* 0.0674**

(0.007) (0.080) (0.007) (0.036) (0.007) (0.034)Tenure 0.387** 0.871** 0.385** 0.689*** 0.603*** 0.819***

(0.172) (0.382) (0.174) (0.242) (0.183) (0.223)College -3.736 -7.538 -3.714 -6.748 -3.414 -6.015

(4.809) (6.436) (4.806) (5.74) (4.839) (5.544)Time Fixed Effects YES YES YES YESGroup Fixed Effects YES YESObservations 618 618 618 618 618 618

I OLS estimates of document access n.s. but IV estimates are significant.

I Most conservative Model (6) implies causal performance effect of ≥ 5%.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

IV: Variation in branch attitudes

Table: IV Estimates

(1) (2) (3) (4) (5) (6)Total Performance OLS IV OLS IV OLS IVNumber Documents -0.00123 0.0197** -0.00138 0.0225*** -0.00347 0.0194**

(0.003) (0.008) (0.003) (0.008) (0.003) (0.008)Number Questions -0.0306*** -0.133** -0.0287*** -0.104*** -0.0169** -0.0908***

(0.008) (0.061) (0.008) (0.034) (0.008) (0.033)Number Answers 0.0175*** 0.112 0.0148** 0.0727** 0.0114* 0.0674**

(0.007) (0.080) (0.007) (0.036) (0.007) (0.034)Tenure 0.387** 0.871** 0.385** 0.689*** 0.603*** 0.819***

(0.172) (0.382) (0.174) (0.242) (0.183) (0.223)College -3.736 -7.538 -3.714 -6.748 -3.414 -6.015

(4.809) (6.436) (4.806) (5.74) (4.839) (5.544)Time Fixed Effects YES YES YES YESGroup Fixed Effects YES YESObservations 618 618 618 618 618 618

I OLS estimates of document access n.s. but IV estimates are significant.

I Most conservative Model (6) implies causal performance effect of ≥ 5%.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Large Branches

Table: IV Estimates: Large Branches (> 50)

(1) (2) (3) (4) (5) (6)Total Performance OLS IV OLS IV OLS IV

Number Documents 0.007 0.026 0.006 0.0129* 0.004 0.0156**(0.005) (0.042) (0.005) (0.007) (0.005) (0.007)

Number Questions -0.0455*** 0.224 -0.0384*** -0.0422** -0.0199** -0.0377*(0.009) (0.683) (0.009) (0.019) (0.010) (0.021)

Number Answers 0.0316*** -0.387 0.019 0.020 0.011 0.0392*(0.011) (1.049) (0.013) (0.025) (0.013) (0.021)

Tenure 0.243 -0.039 0.211 0.269 0.603** 0.695**(0.272) (1.100) (0.278) (0.269) (0.282) (0.286)

College -25.25*** -13.650 -22.65*** -24.11*** -19.94*** -23.44***(7.129) (33.150) (6.421) (6.669) (7.420) (8.608)

Time Fixed Effects YES YES YES YESGroup Fixed Effects YES YESObservations 240 240 240 240 240 240

A standard deviation increase inI Documents ⇒ increases output by 10%;I Questions ⇒ decreases output by 21%;I Answers ⇒ increases output by 20%.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Interpretation

I There exists substitution between individual ability and accessto others’ knowledge.

I Local Average Treatment Effect: loan officers very susceptibleto the branch environment.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Results

1. We document the existence of PPDs within and across branches ofa major Japanese bank. Shared information might explain asignificant portion of this heterogeneity.

2. Access to information appears to substitute for officers’ ability. Lowskilled workers benefit the most from access to others’ information.

3. The likelihood of being promoted is negatively correlated with thenumber of questions asked (screening effect) and positivelycorrelated with the number of answers provided (signaling effect).

4. Anti-corruption law job rotation reduces loan officers’ performance,explained by destruction of specialized human capital.

5. Controlling for unobserved heterogeneity over time, branches, andofficers, a standard deviation increase in information accessincreases performance by ≈ 10%. Output falls in questions and risesin answers. Findings are robust to exogenous cultural variation.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Thank You

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Appendices: Further Results

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Officer Assignment is Weakly Correlated with BranchPerformance

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Relative Measure of Information Access

I We constructed the following relative measures

scoreij = 100−[

rankij − 1

number of officersj − 1

]× 100

I For information access, gathering and production, wherehigher in the rank means more information usage.

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The Introduction The Data Existence of PPDs Identification Strategy IV IV Conclusion

Relative Measure

Table: Panel Model IV - Relative Information Access

Total Performance (1) (2) (3) (4)Information Access 0.0158 0.0376***

(0.011) (0.0125)Information Gathering -0.0264** -0.0446

(0.0108) (0.0275)Information Production -0.0246** 0.000149

(0.0113) (0.0284)Tenure 0.483*** 0.474*** 0.475*** 0.460***

(0.0514) (0.0515) (0.0516) (0.0517)College 4.635*** 4.840*** 4.827*** 4.788***

(1.261) (1.26) (1.26) (1.26)Time Fixed Effects YES YES YES YESGroup Fixed Effects YES YES YES YESBranch Fixed Effects YES YES YES YESTime * Branch F. E. YES YES YES YESObservations 10,045 10,045 10,045 10,045

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