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 
Firms can gain significant benefit from management consulting support in terms of increasing output, productivity and product quality. In addition, management consultancy support can be useful for plants looking to expand operation by hiring more staff, installing new looms, or opening additional plants.
Reference 
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.