Does Management Matter? Evidence from India

By Nicholas Bloom, Benn Eifert, Aprajit Mahajan, David J. McKenzie, J. Roberts. 2011

1,650 citations recorded by the source corpus.

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.

Subfields: Accounting, Economics and Econometrics, Sociology and Political Science

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Citations in the corpus

Management and Shocks to Worker Productivity (2019, positive): “Managerial quality is highly associated with firm productivity (Adhvaryu, 2018; Adhvaryu et al., 2018; Bloom and Reenen, 2011; Bloom and Van Reenen, 2007; McKenzie and Woodruff, 2016), including in experimental studies (Bloom et al., 2013, 2018b; Karlan et al., 2015; McKenzie and Woodruff, 2013).”
Innovation and productivity in formal and informal firms in Ghana (2017, positive): “In line with a growing literature on the relevance of management and managerial skills in firms in LICs (Bloom et al., 2013; Mano et al., 2012), we find a positive and significance effect of non-technological innovation on growth.”
Improving or disappearing: Firm-level adjustments to minimum wages in China (2018, methodology): “Recent work on South Asia has identified changes in management and production practices that can trigger substantial productivity gains without major investments in specific machines or any form of physical capital (Bloom et al., 2013; Atkin et al., 2015).”
The Innovation Paradox: Developing-Country Capabilities and the Unrealized Promise of Technological Catch-Up (2017, neutral): “Source: Bloom et al. 2013.”
Dynamic Capabilities and Entrepreneurial Management in Large Organizations: Toward a Theory of the (Entrepreneurial) Firm (2016, background): “In this study, Bloom et al. (2013) tied technical inefficiency to managerial practices of an operational nature.”
Keeping It Simple: Financial Literacy and Rules of Thumb (2014, background): “Bloom et al. (2013) study the impact of intensive consulting services from an international management consulting firm on the business practices of medium- to large-size firms in the Indian textile industry. Even these large firms were unaware of many modern management practices, and treated plants ”
Reallocation and Technology: Evidence from the U.S. Steel Industry (2015, background): “Hortaçsu and Syverson (2004), Bloom et al. (2013), and Jarmin et al. (2009) show that factors such as vertical integration, management, and large retail chains lead to systematic differences in productivity between plants and consequently, have implications for aggregate industry performance.”
Business Practices in Small Firms in Developing Countries (2017, methodology): “How then might business practices affect this production decision? Bloom et al. (2012) discuss several views of management that have analogs here.”
On the Structural Transformation of Rural Africa (2017, background): “Evidence from India indicates that simple management training can obviate informational barriers and lead to significant productivity gains in non-farm businesses (Bloom et al. 2013).”
Do Management Interventions Last? Evidence from India (2018, neutral): “This paper examines the persistence of management practices adopted after an extensive, consultant-supported intervention that we undertook in a set of multi-plant Indian textile weaving firms from 2008 to 2010 (see Bloom et al. 2013 for a more detailed description).”
Organizational Barriers to Technology Adoption: Evidence from Soccer-Ball Producers in Pakistan (2015, positive): “The Bloom et al. (2013) study randomly allocated consulting services among Indian textile plants and argues that this generated exogenous variation in management practices (arguably a form of technology) which can be used to estimate the effect of those practices on plant outcomes. The authors sugge”
Uniform Pricing in U.S. Retail Chains* (2019, background): “It has also been observed in much higher stakes contexts, such as rental car companies failing to vary prices with car mileage (Cho and Rust, 2010), baseball teams ignoring statistics like on base percentage (Hakes and Sauer, 2006), fracking operations failing to optimize quantities of sand and wate”
The Impact of Consulting Services on Small and Medium Enterprises: Evidence from a Randomized Trial in Mexico (2013, neutral): “The study by Bloom et al. (2013) is more closely related to our study in that they evaluate the impact of intensive consulting services from an international management consulting firm on the business practices of large Indian textile firms.”
The Impact of Management Practices on Employee Productivity: A Field Experiment with Airline Captains (2019, methodology): “While several studies have attempted to delve into the black box of firm-level operations to observe the effects of human resource management on productivity (Ichniowski, Shaw, and Prennushi 1997; Lazear 2000; Shaw 2009; Bloom et al. 2013; Bloom, Sadun, and Van Reenen 2016), a lack of robust causal ”