Abstract
Abstract Differences in management quality are an important contributor to productivity differences across countries. A key question is how to best improve poor management in developing countries. We test two different approaches to improving management in Colombian auto parts firms. The first uses intensive and expensive one-on-one consulting, while the second draws on agricultural extension approaches to provide consulting to small groups of firms at approximately one-third the cost of the individual approach. Both approaches lead to improvements in management practices of a similar magnitude (8–10 percentage points). The group-based intervention leads to significant increases in firm sales, profits, and labour productivity, while the impacts on firm performance are smaller in magnitude and less robust from the individual consulting. The results point to the potential of group-based approaches as a pathway to scaling up management improvements.
Highlights
There are large differences in the management practices used by firms within and across countries (Bloom and Van Reenen, 2007)
We show that the Colombian auto parts sector has similar levels of management practices to start with as the average Colombian manufacturing firm, which is low by global standards and similar to that in countries like India and Kenya with lower per-capita incomes
We explore the extent to which these two mechanisms are occurring in our sample by running the following regression for the change in management practice j in firm i assigned to group g: ΔPractice, α βΔPractıce, λ max
Summary
There are large differences in the management practices used by firms within and across countries (Bloom and Van Reenen, 2007). Impact on Management Practices The interventions aimed to improve specific management practices covered under the 141 practices that comprise Anexo K These practices were measured for all firms during the diagnostic phase in 2013, and measured monthly during the implementation periods of the individual and group interventions, and again one-year post-intervention. Coupled with our use of a balanced panel and randomization triplet fixed effects as controls (which identifies treatment by comparing firms with similar baseline characteristics), we believe survey attrition is extremely unlikely to be driving the positive impacts found on management. The point estimates still suggest a 4 worker (9 percent) increase in employment after the group treatment, but the standard errors are larger, and these impacts are no longer statistically significantly different from zero, or from the individual treatment. It seems likely that any sales gains achieved by the group treatment would have mostly come from taking business away from imports
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