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Does management matter ? evidence from India

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  • Bloom, Nicholas
  • Eifert, Benn
  • Mahajan, Aprajit
  • McKenzie, David
  • Roberts, John

Abstract

A long-standing question in social science is to what extent differences in management cause differences in firm performance. To investigate this, the authors ran a management field experiment on large Indian textile firms, providing free consulting on modern management practices to a randomly chosen set of treatment plants and compared their performance to the control plants. They find that adopting these management practices had three main effects. First, it raised average productivity by 11 percent through improved quality and efficiency and reduced inventory. Second, it increased decentralization of decision making, as better information flow enabled owners to delegate more decisions to middle managers. Third, it increased the use of computers, necessitated by the data collection and analysis involved in modern management. Since these practices were profitable this raises the question of why firms had not adopted these before. Their results suggest that informational barriers were a primary factor in explaining this lack of adoption. Modern management is a technology that diffuses slowly between firms, with many Indian firms initially unaware of its existence or impact. Since competition was limited by constraints on firm entry and growth, badly managed firms were not rapidly driven from the market.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5573.

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Date of creation: 01 Feb 2011
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Handle: RePEc:wbk:wbrwps:5573

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Keywords: Labor Policies; E-Business; Agricultural Knowledge&Information Systems; Rural Development Knowledge&Information Systems; Labor Markets;

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  21. Edward P. Lazear & Paul Oyer, 2007. "Personnel Economics," NBER Working Papers 13480, National Bureau of Economic Research, Inc.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Aid? Or a subsidy to New Zealand business?
    by Terence Wood in Development Policy Blog on 2012-03-04 19:00:38
  2. Annals of technology diffusion
    by Chris Blattman in Chris Blattman on 2011-06-20 09:20:46
  3. Does Management Matter?
    by Tim Worstall in Tim Worstall (Forbes) on 2011-06-20 13:16:39
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