Does Management Matter? Evidence from 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. 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.

Policy implications 
The research does support some of the common recommendations to improve productivity, like increasing competition (both from domestic firms and multinationals) and improving the rule of law. The results also suggest that firms were not implementing best practices on their own because of lack of information and knowledge, therefore both training programs for basic operations management, like inventory and quality control and demonstration projects would help in increasing efficiency.
Bloom, N., Eifert, B., Mahajan, A., McKenzie, D., & Roberts, J., 2013. 'Does Management Matter? Evidence from India'. The Quarterly Journal of Economics, Oxford University Press, vol. 128(1), pages 1-51.