Making good management stick: Evidence from India

A long-standing question in social science is to what extent differences in management cause differences in firm performance. To investigate this, researchers ran a management field experiment on large Indian textile firms. This project provided free consulting on modern management practices to a randomly chosen set of treatment plants and compared their performance to the control plants. It finds that adopting these management practices has three main effects. First, it raises average productivity by 11% through improved quality and efficiency and reduced inventory. Second, it increases decentralisation of decision making, as better information flow enables owners to delegate more decisions to middle managers. Third, it increases the use of computers, necessitated by the data collection and analysis involved in modern management.

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