What have we learned so far?
•
Week 1: Strategy as IO as microeconomics
− Value, scarcity, rents, thinking in relative terms
•
Week 2: Industry analysis, i.e. “Porter’s Five Forces”
− Why are some industries more profitable than others?
•
Week 3: Competitive advantage
− Why are some firms more profitable than their competitors?
•
Week 4:
− When is competitive advantage sustainable?
Why?
What are we going to learn next?
Management practice and
productivity
Introduction
•
In week 3 we saw that performance differences
within
industries are larger than performance differences
across
industries
− Typical US manufacturing industry: 95
th
percentile plants get
twice
as much output per unit of input as 5
th
percentile plants
− That’s ridiculous!!!
What could be causing this?
•
Top hypothesis: differences in management practices
− Over a million “management books” on Amazon
− Do “good” managers take different actions with the same
labor, capital and materials?
− How could we find out?
§
Run a randomized experiment!
Bloom
et al
: RCT of management practices
•
Select 20 cotton fabric plants near Mumbai
− Each is part of large multi-plant firms
− Average 300 employees
− Average $7MM sales
•
“Treated” get 5 months of management consulting intervention
•
“Control plants” get 1 month
•
Consulting offered on 38 specific practices tied to factory
operations, quality, and inventory control
•
Collect weekly data on all plants from 2008 to 2010
Conditions: many parts of plants were dirty and unsafe
Garbage outside the plant
Garbage inside a plant
Chemicals without any covering
Flammable garbage in a plant
Conditions: the plant floors were often disorganized and aisles blocked
Instrument
not
removed
after use,
blocking
hallway.
Tools left on
the floor
after use
Dirty and
poorly
maintained
machines
Old warp
beam, chairs
and a desk
obstructing the
plant floor
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- Spring '17
- Management, Coal, treatment plants, Control plants, Vertical Integration
