Please use this form to submit your study for inclusion into our database. It will be checked by a member of the Innovation Growth Lab team, who may be in contact to ask for more information. Your email address * Your name * Title * The name of the study Short summary This management-focused consultancy intervention in the Indian textile industry showed positive impact on overall firm productivity through improved quality, efficiency and reduced inventory, and the effects of the experiment appeared to continue over time. A brief description of the project's goals and its current state Abstract <p>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.</p> The full abstract of the study, if available Links https://doi.org/10.1093/qje/qjs044 Links to any published papers and related discussions Authors * Affiliations Academic and other institutes that the authors of the study are members of Delivery partner Organisations involved in delivering the trial, if appropriate Year Year Year199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023202420252026 Month MonthJanFebMarAprMayJunJulAugSepOctNovDec Day Day12345678910111213141516171819202122232425262728293031 Journal Journal publishing the study, if available Publication stage * Working Paper Published Ongoing Research Forthcoming Discussion Paper Research theme * Entrepreneurship Innovation Business Growth Country Country or countries where this study took place. Topics What sort of topics does the study cover? Sample attributes Hypotheses / research question Does management consulting affect a firm's performance? Sample Trial population and sample selection The sample was randomly chosen from the population of all publically/privately owned textile firms around Mumbai, based on lists provided by Ministry of Corporate Affairs. Firms were between 100-1,000 employees. Geographically the firms were focused in towns of Tarapur and Umbergaon (largest textile towns in area) to reduce consultant travel times. This yielded a sample of 66 potential firms who were then contacted over the telephone by consultants offering free services. Of these 66, 34 expressed interest. These were paid a visit and sent a letter from Stanford and of these 34, 17 agreed to commit senior management time to project (project firms). These 17 firms had 28 plants between them. Number of treatment groups Size of treatment groups 11 firms (14 plants) Size of control group Unit of analysis Clustered? Yes No Cluster details Trial attributes Treatment description A high-calibre management consultancy firm with Indian presence was hired to supply consulting. Senior management in the firms was involved at least 1 day a week. Treatment consisted of 3 phases: Diagnostic phase (given to both treatment and control group) which evaluated current management practises, constructed database of metrics and set up mechanisms for measuring, ending with recommendations. During the 4 month long implementation phase (given only to treatment group) consultants introduced best practices with aim of adoption. Finally, in the measurement phase, collection of performance and management data from all plants. In total control plants received on average 273 consulting hours and the treatment plants 781 hours. Rounds of data collection Baseline data collection and method Mechanisms for baseline data collection were installed during the diagnostic phase of consulting work in both treatment and control. Firm records dating back to April 2008 were used. Also, the researchers used some incumbent measures collected via retrospective interviews. Data collection method and data collected Evaluation Outcome variables <p>Practice adoption rates. Key performance metrics: Quality, inventory, output, total productivity. Long-run effects of management intervention: Number of plants, number of employees, number of looms per plant.</p> Results <p>In the short run, adoption of good management practices by firms that received support to implement the recommendations is more than twice that of firms that only received the initial diagnostic service. Firms that only received the diagnostic typically didn’t adopt the more complex practices like daily quality meetings, formalising monitoring processes or defining roles and responsibilities. In the short run, receiving support to implement the recommendations led to quality defects being cut by about a third, inventory being reduced by about a sixth and output increasing by an average of 9.4 per cent. These improvements led to an average increase of 16.6 per cent in productivity and raised annual profitability by about US$325,000.</p> Intervention costs $75,000 per treatment plant, $20,000 per control plant. Both are reduced pricing due to research project pro bono rates (-50%). Consultants indicated if firms had paid for the consulting it would have cost around $250,00 Cost benefit ratio 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. Citation for use in academic references
