Bloom, NicholasEifert, BennMahajan, AprajitMcKenzie, DavidRoberts, John2012-03-192012-03-192011-02-01https://hdl.handle.net/10986/3340A 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.CC BY 3.0 IGOACCOUNTINGACTION PLANBEST PRACTICESBEST-PRACTICEBUSINESSESCOBB-DOUGLAS PRODUCTION FUNCTIONCOMPUTER USERSCOMPUTERSCONTROL SYSTEMSCORPORATE POLICYDECENTRALIZATIONDEVELOPMENT ECONOMICSDOMESTIC MARKETDOWNWARD BIASE-MAILECONOMIC GROWTHECONOMICSEFFICIENCY IMPROVEMENTSEMPLOYEEEMPLOYMENTENTERPRISE RESOURCE PLANNINGEQUIPMENTESTIMATED PRODUCTIVITYEXCLUSION RESTRICTIONEXTERNAL CONSULTANTSFARMERSFINANCIAL CONSTRAINTSFINANCIAL SUPPORTFIRM ENTRYFIRM GROWTHFIRM LEVELFIRM PERFORMANCEFIRM SIZEFIRM TURNOVERFIRM-LEVEL PRODUCTIVITIESFLOW CHARTHUMAN RESOURCEHUMAN RESOURCE MANAGEMENTIMPACT ASSESSMENTSIMPLEMENTATION PERIODIMPLEMENTATION STAGEINCOMEINCOME INEQUALITYINDUSTRIAL DEVELOPMENTINDUSTRIAL RELATIONSINDUSTRY PRODUCTIVITYINFORMATION FLOWINFORMATION TECHNOLOGYINNOVATIONINTERNATIONAL CONSULTANTSINTERNATIONAL STANDARDSINVENTORIESINVENTORYINVENTORY LEVELSINVENTORY MANAGEMENTLABOR ECONOMICSLABOR MARKETSLABOR PRODUCTIVITYLABOR REGULATIONSLABOR RELATIONSLEGAL ENVIRONMENTLOCAL FIRMSMANPOWERMANUFACTURINGMANUFACTURING INDUSTRYMARKETINGMATERIALMEDIUM ENTERPRISESMOTIVATIONMULTI-PLANT FIRMSNEW TECHNOLOGYOPEN ACCESSORDER MANAGEMENTPERFORMANCE MEASURESPOLITICAL ECONOMYPRESENT STUDYPREVIOUS WORKPRIMARY REASONPRIVATE FIRMSPRIVATE SECTORPRIVATE SECTOR DEVELOPMENTPRODUCT INNOVATIONPRODUCTION PROCESSPRODUCTIVE FIRMSPRODUCTIVITIESPRODUCTIVITYPRODUCTIVITY DISPERSIONQUALITY MANAGEMENTRESULTRESULTSRETENTIONSAFETYSAFETY REGULATIONSSCIENCE FOUNDATIONSET OF STANDARDSKILL-BIASED TECHNOLOGIESSKILLED LABORSKILLED WORKERSTARGETSTELEPHONETEXTILESTOTAL EMPLOYMENTTOTAL WAGETRAINING PLANTRAINING PROGRAMSUSESWAGE BILLWAGE INEQUALITYWAGE LEVELWAGE RATESWAGESWEBWORKERWORKPLACE ORGANIZATIONWorld Bank10.1596/1813-9450-5573