Author(s)
Nicholas Bloom, Benn Eifert, Aprajit Mahajan, David McKenzie and D. John Roberts
Source
NBER Working Paper No. 16658, 2011
Summary
This paper considers the extent to which management differences drive productivity differences across firms.
Policy Relevance
Better management practices can drive growth in developing countries. Multination firms and improved domestic legal institutions can encourage the development and expansion of better-managed firms and consequently increase growth.
Main Points
- Management practices differ across firms and change over time. Some practices are found to be more efficient than others.
- Firms may not adopt more efficient management practices because they may not know better practices exist.
- Other barriers to adoption of good management practices include owner inertia, resistant management, and financial constraints.
- When well-run firms cannot grow quickly, poorly-run firms may not be driven from the marketplace.
- However, improved management practices may actually allow a firm to expand more quickly.
- Modern best practices for management often require technical or other advanced skills for implementation. This may drive demand for educated workers and ultimately increase income inequality.