Sebastian Mallaby explains Why U.S. Business Is Winning:
The first answer is that competition is fiercer. The United States has relatively few trade and regulatory barriers for firms to hide behind, so bad companies either shape up quickly or go bust. In retailing, for example, firms such as Wal-Mart and Target have been able to spread their super-efficient logistics systems all across the country — at least until lately, when a perverse anti-Wal-Mart campaign has sprung up. In Europe and Japan, by contrast, a web of zoning laws entangles efficient retailers, sheltering unproductive companies that overcharge consumers.The next explanation for American superiority is a healthy indifference to first sons. Bloom and Van Reenen report that the practice of handing a family firm down from father to oldest son is five times more common in France and Britain than in the United States. Not surprisingly, this anti-meritocratic practice does not always produce good managers. So even though the best European companies are managed roughly as well as the best American ones, there’s a fat tail of second-rate firms in Europe that’s absent in the United States.
Competition and meritocracy cannot explain all of America’s superiority, however. The U.S. economy has always had these advantages but hasn’t always trounced overseas rivals. Nor is it enough to say that Americans work harder than Europeans, since the productivity numbers show that Americans are boosting what they achieve per hour. And anyone who explains America’s superiority by saying that the country is more ‘dynamic’ or ‘creative’ is merely relabeling the mystery we’re trying to solve.
The best guess about the ‘X factor’ is that America’s business culture is peculiarly well-suited to contemporary challenges. American business is not especially good at coaxing productivity out of factory workers: The era when this was all-important was the heyday of Germany and Japan. But American business excels at managing service workers and knowledge workers: at equipping these people with technology, empowering them with the right level of independence and paying for performance. So the era of decentralized ‘network’ businesses is the American era.
Moreover, America’s business culture is perfectly matched to globalization. American executive suites and MBA courses are full of talented immigrants, so American managers think nothing of working in multicultural firms. The immigrants have links to their home countries, so Americans have an advantage in establishing global supply chains. The elites of Asia and Latin America compete to attend U.S. universities; when they return to their countries, they are keener to join the local operation of a U.S. company than of a German or Japanese one.