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Abstract:

Journal article
Does management matter? Evidence from India
Nicholas Bloom, Benn Eifert, Aprajit Mahajan, David McKenzie and John Roberts
February 2013
Paper No' :


JEL Classification: L2;M2;O14;O32;O33


Tags: firm objectives; organization; and behavior; growth; business economics; industrialization; manufacturing and service industries; choice of technology; management of technological innovation and r&d; technological change; choices and consequences; diffusion processes; management; organization; it; productivity and india

A long-standing question is whether differences in management practices across firms can explain differences in productivity, especially in developing countries where these spreads appear particularly large. To investigate this, we ran a management field experiment on large Indian textile firms. We provided free consulting on management practices to randomly chosen treatment plants and compared their performance to a set of control plants. We find that adopting these management practices raised productivity by 17% in the first year through improved quality and efficiency and reduced inventory, and within three years led to the opening of more production plants. Why had the firms not adopted these profitable practices previously? Our results suggest that informational barriers were the primary factor explaining this lack of adoption. Also, because reallocation across firms appeared to be constrained by limits on managerial time, competition had not forced badly managed firms to exit.