Abstract:A long standing question in social science is whether management matters. To investigate this we run a field experiment on 28 plants in large Indian textile firms to evaluate the causal impact of modernizing management practices. We do this by providing free management consulting to a set of randomly chosen treatment plants, and compare their performance to a set of control plants. We find that improving management practices had three main effects. First, it led to significantly higher efficiency and quality, and lower inventory levels. These changes increased productivity by 10.5% and profitability by 16.8% on average. Second, it increased the decentralization of decision making, as better production monitoring enabled the owners to delegate more decisions to their plant managers. Third, it increased the use of computers, necessitated by the extensive data collection, analysis and dissemination involved in modern management. Since these management practices were profitable, and firms were able to transfer them from their treatment plants to their other plants, this raises the question of why they had not adopted these practices before? Our results suggest that informational barriers were initially a primary factor in explaining this lack of adoption. Modern management practices are a type of technology that diffuse slowly between firms, with many Indian firms simply unaware of their impact or existence. A secondary factor constraining management appears to be the ability and behavior of the family firm CEOs.JEL No. L2, M2, O14, O32, O33.

This paper draws on data from over 35,000 respondents in twenty-two public opinion surveys in ten countries and finds strong evidence that ethnic identities in Africa are strengthened by exposure to political competition. In particular, for every month closer their country is to a competitive presidential election, survey respondents are 1.8 percentage points more likely to identify in ethnic terms. Using an innovative multinomial logit empirical methodology, we find that these shifts are accompanied by a corresponding reduction in the salience of occupational and class identities. Our findings lend support to situational theories of social identification and are consistent with the view that ethnic identities matter in Africa for instrumental reasons: because they are useful in the competition for political power.

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. To investigate this, we ran a management field experiment on large Indian textile firms. We provided free consulting on management practices to randomly chosen treatment plants and compared their performance to a set of control plants. 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. JEL Codes: L2, M2, O14, O32, O33.

This paper ties together the macroeconomic and microeconomic evidence on the competitiveness of African manufacturing sectors. The conceptual framework is based on the newer theories that see the evolution of comparative advantage as influenced by the business climate --a key public good --and by external economies between clusters of firms entering in related sectors. Macroeconomic data from purchasing power parity (PPP), though imprecisely measured, estimates confirms that Africa is high-cost relative to its levels of income and productivity.

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