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Does Management Matter? Evidence from India

By Nicholas Bloom, Benn Eifert, Aprajit Mahajan, David Mckenzie, John Roberts Abstract, Shruti Rangarajan, Jitendra Satpute, Shreyan Sarkar and Ashutosh Tya

Abstract

A long-standing question in social science is to what extent differences in management cause differences in firm performance. To investigate this we ran a management field experiment on large Indian textile firms. We provided free consulting on modern management practices to a randomly chosen set of treatment plants and compared their performance to the control plants. We find that adopting these management practices had three main effects. First, it raised average productivity by 11 % 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. Our 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 wa

Topics: JEL Classifications, L2, M2, O14, O32, O33. Keywords, management, organization, IT, productivity and India
Year: 2011
OAI identifier: oai:CiteSeerX.psu:10.1.1.185.3655
Provided by: CiteSeerX
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